NEW YORK: The dollar on Monday avoided large moves against other major currencies ahead of jam-packed Tuesday that includes testimony by the head of the US central bank and other closely-watched events.
The dollar notched modest increases against the British pound and the yen, while retreating a bit against the euro.
US Federal Reserve Chair Janet Yellen Tuesday kicks off two days of testimony before congressional committees that are expected to focus in part on the Fed's time-frame for raising benchmark interest rates.
The calendar also includes a Bank of Japan meeting, public testimony from the head of the Bank of England, a US retail sales report for June and earnings from some major US companies, including JPMorgan Chase and Goldman Sachs.
Given that calendar and the plethora of "major event risk" on the horizon, investors avoided big bets Monday "before the newswires heat up," said John Kicklighter, chief currency strategist at DailyFX.
Dollar watchers were particularly keen to hear from Yellen. Yellen could face questions from lawmakers on the challenges on the risks of keeping interest rates near zero for too long, said Nawaz Ali, an analyst at Western Union Business Solutions.
"Comments by Yellen about future rate rises which turn out to be either more hawkish or more dovish than what markets are expecting could have a big impact on currency markets," Ali said.
Kathy Lien, analyst at BK Asset Management, said the effect of Yellen's testimony on the dollar will turn on how she addresses improving economic data.
"Traders should look to buy dollars if Yellen acknowledges the recent improvements in the economy and says that rates could rise early next year," Lien said.
"However if she goes out of her way to distinguish the difference between the end of tapering and the beginning of tightening and refuses to specify when rates will rise, the dollar should decline."
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