July 7, 2014 / 2:20 PM / in 3 years

CORRECTED-FOREX-Dollar edges higher against euro, Fed meeting in focus

3 Min Read

(Corrects dollar level in sixth paragraph and dollar rate against yen in second to last paragraph)

* Dollar gains against euro, weaker against sterling

* Fed meeting minutes on Wednesday in focus

By Karen Brettell

NEW YORK, July 7 (Reuters) - The U.S. dollar inched higher against the euro on Monday but pared some early gains, as investors continued to digest last week's strong U.S. employment report and speculated about when the Federal Reserve is likely to begin raising rates.

The dollar stabilized after a week of gains, with no major U.S. economic releases due this week and trading expected to be relatively light after the Independence Day holiday.

The dollar has gained and the Treasuries yield curve has flattened after data on Thursday showed nonfarm payrolls increased by 288,000 jobs last month and the unemployment rate fell to 6.1 percent from 6.3 percent in May.

The next major focus will be the releases of minutes from the Fed's June meeting on Wednesday, which will be scoured for signs about when central bank members see an interest rate increase as likely.

"The discussion won't reflect the strong bounce in nonfarm payrolls, but will serve as a reference as to what the internal debate is in the FOMC regarding the first rate hike," said Martin Schwerdtfeger, a foreign exchange strategist at TD Securities in Toronto.

The dollar was last up 0.02 percent against the euro at $1.3596. It rallied to $1.3577 earlier on Monday after German industrial output fell 1.8 percent on the month in May, its biggest drop in more than two years.

The weak German data kept alive expectations the European Central Bank may need to loosen monetary policy further in coming months in the face of disinflationary pressures and subdued economic growth.

The dollar weakened against the British pound, meanwhile, as investors speculated about whether the Bank of England might signal it will be the first of the world's big central banks to increase rates when it meets this week.

The Bank of England is generally not expected to raise interest rates until early next year but speculation it could pull the trigger before then is growing, a Reuters poll found on Thursday.

"Some might be thinking that they will bring forward rate expectations in the U.K., that is what is signaling a stronger sterling this morning," said Schwerdtfeger.

Sterling rose 0.24 percent against the dollar to$1.7117. The Japanese yen also climbed 0.23 percent to 101.87 yen.

The dollar index against a broad basket of currencies edged higher to 80.246, but was down from an earlier high of 80.359, the highest in a week-and-a-half. (Additional reporting by Anirban Nag in London; Editing by Tom Brown)

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