Dollar rises from one-month low on prospect of higher interest rates

The dollar rose from a one-month low on Monday, ahead of central bank meetings and economic data coming later this week, boosted by the prospect of a tighter U.S. monetary policy

The upward move came at the expense of the euro, the Japanese yen and the Swiss franc

“There’s so much event risk on tap this week and the dollar has underperformed over the last two weeks that the market’s starting to buy back the dollar,” said Joseph Manimbo, senior market analyst at Western Union Business Solutions

The dollar index was up nearly 0.2 at 93.8150 for the day after having fallen during trading in Asia to a one-month low following comments on Friday from Federal Reserve Chair Jerome Powell that affirmed plans to cut back on bond purchases

At one point the dollar index was up 0.4% on the day as yield on the 10-year U.S. Treasury rose. Then dollar eased off, as did the 10-year yield, which was last around 1.63%

“Broadly speaking, the dollar is taking its cue from the 10- year, but there’s been a bit of decoupling on the notion that other central banks appear poised to raise rates before the Fed,” Manimbo said

Traders are awaiting U.S. economic growth data and central bank meetings in the euro zone, Japan and Canada later this week that could move exchange rates

The euro lost 0.3% to $1.1610. The European Central Bank meets on Thursday. While a big change is seen as unlikely, comments from the bank could shine shift views on how much inflationary pressures could impact interest rates

“There is no way that they (ECB policymakers) can’t acknowledge that inflation has run higher, but also they do not want to get dragged into a game of expectations given the ECB’s dovish proclivities,” said Jeremy Thomson-Cook, chief economist at payments firm Equals Money

“Alongside inflation and growth data due this week, we will be able to mark the European economy a lot better against its UK and U.S. counterparts, something we expect to continue to allow for additional euro weakness moving forward

The dollar chalked up gains versus the Japanese yen, rising 0.2% to 113.50 yen. The Bank of Japan meets later this week but like the ECB, it is not expected to shift from its dovish policy stance

Thursday’s U.S. gross domestic product figures — if they show an expected slowdown — could take some pressure off the Fed even while inflation runs relatively hot