Dollar Rises as Markets Prepare for Fed, BOJ Rate Hikes

The dollar firmed up on Monday ahead of key Federal Reserve and Bank of Japan meetings this week. The euro was 0.28% softer at $1.1565, while sterling last bought $1.3503. The U.S. dollar index rose to a 0.23% higher at 99.34 after two straight weeks of small declines.

Rising yields and shifting rate expectations have so far failed to push the dollar significantly higher, as central banks in major economies are also expected to raise rates while worries around Fed policy credibility linger. Fed Chair Kevin Warsh will need to match his tough rhetoric with policy action or risk further undermining his credibility on controlling inflation.

The Japanese yen was 0.3% weaker at 154.03 per U.S. dollar, though it remained not far from the seven-month high of 152.89 that it touched last week. Signs are emerging of a shift in market sentiment for the currency, with speculators turning to a net long position on the yen for the first time since February.