On Friday, the US dollar rose to pull away from lows of several months against the sterling and the euro, as investors shifted their focus toward a slew of meetings of central banks in the coming week.
The Bank of England (BoE), the US Federal Reserve, and the European Central Bank (ECB), all have their meetings scheduled in the next week where they will make their rate decisions.
The central banks will determine what adjustments will be required, as they continue fighting against stubborn inflation in a difficult economic situation globally.
According to currency analysts, they do not expect to see any big movements at this week’s close, as there is also a focus on a key report on US jobs due next Friday.
The US dollar index which assesses the currency against six of its major peers, rose 0.2% to reach $101.930.
The greenback had dropped to a low of almost nine months against the euro and seven months against the British pound, but it started climbing once more.
There was a drop of 0.1% in the euro against the greenback, as it reached $1.08760, while a 0.4% loss was recorded in the Sterling, which came down to $1.23670.
Currency analysts said that there could be a turnaround from a technical perspective because the US dollar has failed to break lower.
Meanwhile, there was a rise in the Japanese yen against the greenback, as hot inflation readings for Japan’s capital pushed up bets of the Bank of Japan (BOJ) adopting a hawkish stance.
There was a 0.3% drop in the US dollar against the Japanese yen, which was trading at 129.900.
This was after data showing an acceleration in the consumer price inflation in Tokyo to a peak of 42 years this month added pressure on the BOJ to move away from its ultra-loose monetary policy.
Market strategists said that there were high expectations in the market for changes that could come any time, which includes the next meeting of the BOJ scheduled for March.
They added that these expectations would remain high, which means that the yen would continue to trade up.
Analysts said that there was a possibility that the dollar-yen currency pair could actually break below the level of 125.
There are broad expectations of an interest rate hike of 25 basis points by the US Fed in its meeting on Wednesday, which would be a reduction from the 50 basis points increase it delivered in December.
As for the ECB, it has all but made the commitment to increase the interest rate by 50 basis points in its own meeting on Thursday.
As far as the Bank of England is concerned, it is facing a tough challenge when it comes to controlling inflation without inflicting more damage on an economy that is already in a recession.
The British central bank will also make its policy decision on the same day as the ECB and it is expected to deliver a hike of 50 basis points too.