Investing.com - The dollar edged lower against the other major currencies on Monday, but held near recent highs amid expectations that the Federal Reserve is on track to raise interest rates this week.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, eased to 101.56.
Little doubt now remains that the Fed will hike rates for the first time in a year at the conclusion of its meeting on Wednesday, with investors pricing in a 100% chance of an increase, according to federal funds futures tracked Investing.com's Fed Rate Monitor Tool.
The Fed is also expected to announce updated economic forecasts and markets will be watching for signals the outlook for inflation and the expected pace of rate hikes in 2017.
Higher rates boost the dollar by making the currency more attractive to yield-seeking investors.
The dollar climbed against the yen, building on the previous session’s gains, with USD/JPY up 0.55% to 116.00, the highest level since February 8.
The yen showed little reaction to data earlier showing that Japanese core machinery orders rose in October for the first time in three months, pointing to a pickup in capital spending.
The euro edged higher, with EUR/USD up 0.13% to 1.0571.
But the single currency remained under pressure after the European Central Bank extended its bond-buying stimulus program late last week, even as it cut back on the size of asset purchases.
The pound was little changed, with GBP/USD at 1.2596.
Meanwhile, the Canadian dollar rose to seven-week highs against the greenback as a rally in oil prices boosted the commodity related currency.
USD/CAD was down 0.52% to 1.3120, the weakest level since October 20.