NEW YORK: The dollar was little changed on Monday before a busy week for central banks, with the Federal Reserve expected to raise rates by an additional 25 basis points on Wednesday.
Investors will focus on whether the Fed indicates that it expects to pause rate increases after May, or if it keeps the possibility of an additional hike in June or later alive.
“Many people say the Fed will signal that it’s going to pause, and I don’t think it can afford to do that,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York, adding that “the Fed wants to maintain some optionality and flexibility.”
The dollar gained on Friday after data showed that core inflation stayed elevated in March. Consumer price inflation data next week will also be watched for further signs of inflation remaining high.
Jobs data on Friday is this week’s main economic focus. It is expected to show that employers added 180,000 jobs in April.
The dollar index was little changed on the day at 101.70. The euro gained 0.07% to $1.1023. The single currency is holding just below a one-year high of $1.1096 reached last Wednesday.
The European Central Bank (ECB) is widely expected to raise rates for the seventh straight meeting on Thursday, with a 50 basis points increase on the table.
The yen hit a seven-week low against the dollar after the Bank of Japan on Friday kept ultra-low interest rates but announced a plan to review its past monetary policy moves.
The dollar was last up 0.34% at 136.80 yen.
The Reserve Bank of Australia is also widely expected to extend a rate pause on Tuesday. The Aussie dollar was last up 0.70% at $0.6664. It is up from a seven-week low of $0.6573 on Friday.
Trading volumes were thin on Monday with markets in many countries closed for the May Day holiday.
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