NEW YORK: The dollar rose against major currencies on Monday, bolstered by expectations the Federal Reserve this week will acknowledge anew improvements in the US economy and provide fresh details about the US central bank's looming tightening policy.
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 US economy has continued to gain traction relative to other major nations.
The index was last at 84.259, slightly up on the day. The Federal Open Market Committee is expected to affirm the US economy's positive performance on Wednesday, at the end of the Fed's two-day meeting, plus a possible timeline 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 late trading, the euro fell 0.2 percent against the dollar to $1.2938.
The dollar also gained against the Swiss franc, rising 0.2 percent to 0.9353 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.
But should the Fed remove the "considerable time" reference from its statement on when it might hike rates, that would be interpreted more hawkishly and set the stage for faster dollar appreciation, said Joe Manimbo, senior market analyst, at Western Union Business Solutions in Washington.
Sterling, meanwhile, remained on the defensive before Thursday's 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 $1.6228 and remained vulnerable after last week's drop to a 10-month low of $1.6052.
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 US cents for the first time since March 20 to trade at $0.8984, before recovering to US$0.9030.
It has tumbled four cents in the past week.
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