Written by Saqib Iqbal Ahmed
NEW YORK (Reuters) – The dollar rose against the euro on Monday, as investors awaited more clues to help them determine the course of U.S. interest rates, following cautious statements from Federal Reserve officials (the U.S. central bank) even as signs of a slowdown in inflation appeared.
Atlanta Fed President Rafael Bostic said Monday that it will take some time for the U.S. central bank to become confident that inflation is on its way to the central bank's 2% target.
“The issue now is when will we be sure that inflation is clearly on its way back to 2%,” Bostic said in an interview with Bloomberg Television. “I think it will take some time before we know that for sure.”
Besides Bostic, several other speakers are scheduled to speak at the Fed on Monday and later in the week. Markets will also focus on the minutes of the Federal Reserve's latest meeting, which is scheduled to be held on Wednesday.
The euro fell 0.05 percent against the dollar to $1.0836. Against the yen, the dollar rose 0.3 percent to 156.15 yen.
Data last week showed that U.S. consumer prices rose less than expected in April, pricing markets in for 50 basis point Fed rate cuts this year. However, several Fed officials have expressed caution about when interest rates might fall.
With little economic data on the calendar for the day, most major currency pairs clung to tight trading ranges on Monday.
“I think after the CPI passed last week, the FX market lacks a catalyst at this stage,” said Michael Brown, market analyst at online broker Pepperstone in London.
“While the FOMC calendar is, once again, very crowded, there appears to be little new information that speakers can add at this point, especially with a clear sign of a reaction function, the ruling out of another rate hike, and some numbers… Promising inflation: “At least there is a need to provide the confidence required for inflation to return towards 2% before the first cut can be implemented,” Brown said.
Survey-based measures of the economy in the euro zone, Germany, the United Kingdom and the United States are due this week.
The euro remained not far from the highest level in nearly two months at $1.0895, which it touched last week. The index has risen 1.8% since the beginning of May, supported by the decline in the dollar against the backdrop of weak growth and inflation data in the United States, as well as the recovery of the euro zone economy.
As the Japanese yen weakened during the day, traders remained alert for signs of government intervention. The currency has moved in narrow ranges over the past two trading days after a turbulent start to the month of May following suspicious rounds of currency interventions by Tokyo to support the yen.
Sterling was almost flat on the day after reaching a two-month high of $1.2711, and was recently just below that level, ahead of the UK inflation report due on Wednesday.
The Australian dollar fell 0.3 percent to $0.6671. It rose 3.1% this month amid rising Australian inflation. Weakness in the commodity-linked currency on Monday despite strength in commodity prices does not bode well for the near-term outlook for the Australian dollar, Pepperstone's Brown said.
“(Weakness) on a day when commodities are rising and stocks are strong enough, it might be a canary in the coal mine for the bulls,” Brown said.
In cryptocurrencies, bitcoin was little changed on the day at $67,027, just below the five-week high of $67,712 touched in the previous session.