By Peter Nurse
Investing.com - The dollar was largely unchanged in early European trade Monday, with traders showing caution ahead of the latest two-day meeting of the Federal Reserve.
At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was marginally lower at 90.483, after posting a gain of just over 0.5% last week.
USD/JPY rose 0.1% to 109.76, GBP/USD climbed 0.1% to 1.4112, EUR/USD edged lower to 1.2104, after touching an almost one-month low of 1.2093 in the previous session, while the risk-sensitive AUD/USD was 0.1% higher at 0.7711.
The greenback saw some gains last week after the U.S. consumer price index jumped 5.0% year-on-year in May, the sharpest rise in more than a dozen years, raising fears the Federal Reserve will be forced into reining in its ultra easy monetary policies earlier than expected.
However, those gains were limited as many in the markets seem to have bought into the repeated comments by policy makers that inflation would be transitory.
“The Fed will likely be forced into debating moderate overshooting of the inflation target but it still seems as if the market discards big directional surprises to the inflation outlook. The Fed will not be convinced of sustained pressure in June,” said analysts at Nordea, in a note.
Still, while the central bank may not move this week, after all employment increased by 559,000 last month, less than economists expected, Fed officials may be close to giving clues on the timing for slimming its asset-purchase program.
According to a Bloomberg survey, some 40% expect the Fed to take its first step toward tapering its current $120 billion in monthly bond purchases in late August when Chair Jerome Powell hosts a policy retreat in Jackson Hole, Wyoming. Another 24% see that happening the following month.
Elsewhere, USD/RUB is rising again, up 0.4% to 72.0205, even after Russia's central bank raised its key interest rate by 50 basis points to 5.5% on Friday.
Governor Elvira Nabiullina said the board had considered an even bigger rise of 75 or 100 basis points and that another rate hike was highly probable when they next meet on July 23.
Annual consumer inflation, the central bank's main area of responsibility, accelerated to 6% in May, a level not seen since October 2016 when the key rate was at 10%.
USD/TRY traded 0.1% higher at 8.3885, following Sunday’s news that Turkey signed a new $3.6 billion swap agreement with China, increasing the limit on their existing currency arrangement to $6 billion.
The arrangement with one of Turkey’s biggest trading partners will allow the country to boost trade in local currency and avoid using dollars, supporting the central bank’s reserves.