As investors stayed cautious in anticipation of several important policy announcements due this week, the dollar edged up slightly on Monday. The Federal Reserve is expected to maintain rates in place for its first time since January 2022, which would mark a change from recent practice.
The tone for this week will be set by monetary policy conferences at the Federal Reserve, the European Central Bank and the Bank of Japan, as markets look for hints from decision-makers on the direction that interest rates will go in the future.
On Tuesday, as the Fed begins its two-day meeting, data on May's inflation in the United States is also released.
According to Helen Given, an FX trader at Monex USA in Washington, even if it is probable than not that the Fed would "skip" a rise this month, there seems to be a general lack of interest in being on the wrong side of the stock market should they decide to increase this month.
Everyone, according to her, appeared to be "holding their breath" and watching for cues from Fed Chairman Jerome Powell.
Given stated that an increase on Wednesday would probably be quite dollar-positive since it would go against present market expectations.
Refinitiv's FedWatch reports that the money market is leaning toward the Fed taking a break, but the majority of them anticipate an increase at the July meeting.
The vast majority of analysts, on the other hand, predict that the European Central Bank will raise its benchmark interest rate by 25 basis points on Thursday and once more in July before halting for the remainder of the year as long as inflation is persistent.
The US dollar index lost around 0.5% last week, which was the biggest weekly decline since mid-April. It last rose by 0.1% to 103.60.
The euro was marginally higher at $1.0760, up from the previous week's 0.4% gain, which was the initial weekly gain in around a month.
Prior to the two-day meeting of the Bank of Japan, the Japanese yen fell 0.2% to 139.55 per US dollar. The bank is anticipated to keep its ultra-loose monetary policy and predict a moderate recovery in the economy as strong corporate and household spending offset the impact of slowing international demand, according to sources. On Friday, the Bank of Japan releases details about its policy choice.
In a different development, the Reserve Bank of New Zealand indicated this month that it had reached its maximum level of tightening after finishing its most ferocious cycle of rate increases since 1999 by lifting rates to 5.5%, the highest level in more than 14 years. It caused a 2.7% decline in the value of the New Zealand dollar in May.
Sterling dropped 0.6% versus the dollar to $1.2510, the kiwi was last seen down 0.1% to US$0.6124, while the Australian currency moved up to US$0.6750 despite light trading due to a holiday across most of Australia.
Recent soft statistics have increased prospects for monetary easing by the People's Bank of China this year, which has caused the offshore yuan in China to continue losses and trade at the lowest point against the US dollar since November. Last seen the dollar up 0.2% to 7.158.