By Gina Lee
Investing.com – The dollar was up on Monday morning in Asia, with the euro near a three-week high hit during the previous week. Investors continued to digest the European Central Bank (ECB)’s hawkish turn while saying further short-term gains are less likely as the U.S. Federal Reserve’s imminent interest rate provided support to the dollar.
The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched up 0.07% to 95.545 by 11:03 PM ET (4:03 AM GMT).
The USD/JPY pair inched up 0.07% to 115.28.
The AUD/USD pair inched up 0.04% to 0.7078, with Australia releasing retail sales data earlier in the day. The NZD/USD pair inched down 0.05% to 0.6616.
The USD/CNY pair fell 0.44% to 6.3328, with Chinese data released earlier in the day showing that the Caixin services purchasing managers index was 51.4 in January.
The GBP/USD pair inched down 0.02% to 1.3527.
Investors now await U.S. inflation data, including the consumer price index, due on Thursday. A strong reading could escalate bets of a Fed interest rate hike in March 2022.
The euro traded at $1.1451, not far from the high of $1.4183 hit during the previous week and near levels last hit in mid-January 2022. The dollar, meanwhile, received a late boost at the end of a bruising week from a strong U.S. jobs report.
The report showed that non-farm payrolls were at 467,000 in January and the unemployment rate was 4%. The safe-haven U.S. currency could also see further gains, according to some investors.
"We see the risk of more dollar upside in the near-term if interest rate markets price a greater chance of a 50bp hike in March. But the previous week’s hawkish turn by ECB President Christine Lagarde suggests any upside in the dollar will be capped," Commonwealth Bank of Australia (OTC:CMWAY) head of international economics Joe Capurso said in a note.
In the short term, "with little fresh information from Europe likely this week to further boost market pricing for ECB hikes, material further upside to the euro is unlikely,” the note added.
Markets are pricing in a one-in-three chance that the Fed could start hiking interest rates in March, with a reasonable chance that rates will reach 1.5% by the end of 2022.
U.S. two-year yields were higher and near a two-year high at 1.32% on Monday, while benchmark 10-year yields were at 1.9049%.
Investors now await speeches from the Fed, ECB, Bank of England, Reserve Bank of Australia (RBA), and the Bank of Canada throughout the week. Klaas Knot, Dutch Central Bank president and a members of the ECB's governing council, said on Sunday he expects a hike in the fourth quarter of 2022.