NEW YORK: The dollar rose against major currencies on Monday, bolstered by expectations the Federal Reserve this week will acknowledge anew improvements in the U.S. economy and provide fresh details about the central bank's looming tightening cycle.
The dollar index, a measure of the greenback's value against six major currencies, has posted weekly gains for nine straight weeks on evidence the U.S. economy has continued to gain traction relative to other major nations.
The Federal Open Market Committee is expected to affirm the U.S. economy's positive performance on Wednesday, at the end of the Fed's two-day meeting, plus a possible time line as to when interest rates would start rising. Some strategists, however, said the market could be setting itself up for disappointment.
"There is significant risk that the market may be miscalculating the degree of hawkishness that the Fed is going to unleash on Wednesday," said Boris Schlossberg, managing director of FX Strategy at BK Asset Management in New York.
"The market is utterly convinced the Fed is almost going to signal the exact beginning of the rate hiking cycle. But I actually think the Fed will be more cautious and ambiguous."
In mid-morning trading, the euro fell 0.2 percent against the dollar to $1.2935. The dollar also gained against the Swiss franc, rising 0.2 percent to 0.9345 franc.
Schlossberg believes there is still a great degree of uncertainty among consumers, specifically with respect to wage inflation. He added that the Fed would want to see this specific wage indicator increase before it commits fully to a tightening cycle.
Sterling, meanwhile, remained on the defensive before the Sept. 18 referendum on independence for Scotland, with polls showing the "Yes" and "No" camps pretty much neck-and-neck. A win for the "Yes" campaign could end the 307-year-old union with England and lead to the breakup of the United Kingdom.
The pound was softer at $1.6235 and remained vulnerable after last week's drop to a 10-month low of $1.6052.
Sweden's crown hit a two-year low against the dollar after voters elected a minority government, which could trigger political uncertainty in Scandinavia's biggest economy.
The dollar rose as high as 7.1499 against the Swedish crown , the crown's weakest since June 2012, and last traded flat at 7.1257.
The Australian dollar, meanwhile, slid to a six-month low against the greenback on worries about slower Chinese growth. Investors took aim at the Aussie, often used as a proxy for China plays, after data showed Chinese factory output grew at the weakest pace in nearly six years in August. Growth in other key sectors also cooled.
The Aussie fell below 90 U.S. cents for the first time since March 20 to trade at $0.8984, before recovering to U.S.$0.9032. It has tumbled four cents in the past week.
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