The dollar edged higher against the euro Monday as investors wagered that the Federal Reserve might point to an interest-rate increase in June at its meeting later, amid a parade of important central-bank decisions this week.
The Fed kicks off its two-day policy meeting Tuesday, which isn’t expected to result in an increase to benchmark interest rates when it releases its policy statement Wednesday, but may offer clues about the central bank’s outlook for future monetary-policy moves.
An interest-rate increase makes the dollar more alluring to traders because it means a higher return on dollar-based deposits.
The euro retreated to $1.1121 from $1.1163 late Friday in New York. The British pound traded at $1.4365, compared with $1.4382 Friday.
Trading was relatively muted in the currency market, with no important economic data expected during the U.S. session. Investors’ focus remained squarely on the spate of central bank meetings expected later. In addition to the Fed, the Bank of Japan, Bank of England, Swiss National Bank , Norway’s Norges Bank and the Russian Central Bank also are expected to meet.
“The eurodollar is lacking clear direction but we do have the Fed meeting later in the week and that is likely to pull the focus back to the U.S. dollar,” said Jane Foley, senior currency strategist at Rabobank.
Oil prices turned lower Monday after rising to their highest levels of the year late last week, dampening investors’ appetite for risky assets like stocks and emerging-market currencies. The Russian ruble , Mexican peso and Brazilian real were notably lower against the dollar.
The dollar traded at ¥113.60, compared with ¥113.81 late Friday, as investors awaited the Bank of Japan decision on Tuesday.