Dollar gains vs most currencies ahead of Powell testimony

NEW YORK (Reuters) - The dollar rose against most currencies, except the euro, in choppy trading on Monday ahead of a slew of U.S. economic data and events this week, including Federal Reserve Chairman Jerome Powell’s testimony, which could determine whether the greenback’s recovery from a three-year low can be sustained.

FILE PHOTO: U.S. Dollar and Euro notes are seen in this June 22, 2017 illustration photo. REUTERS/Thomas White/Illustration/File Photo

The prospect of further interest rate increases by the Federal Reserve, more than what the market initially priced in, has bolstered the dollar in the last few weeks.

Concerns about rising inflation after a prolonged period of stagnant price gains have raised the possibility that the Fed could tighten more than expected this year and the next, an expectation that has boosted Treasury yields and lifted the dollar.

Since the dollar index hit a three-year trough more than a week ago, the U.S. currency has risen 1.4 percent and is tracking a nearly 1.0 percent gain for the month of February, after losses of more than 3 percent in January.

The focus this week is Powell’s first congressional testimony. Powell will testify on the central bank’s semiannual report on monetary policy and the economy on Tuesday before the U.S. House of Representatives’ Financial Services Committee.

“There shouldn’t be too much change in Powell’s initial stance, as to that of Janet Yellen,” said James Hughes, chief market analyst, at forex broker AxiTrader in London.

“The economy is still in a fairly strong position and a course of gradual rate hikes is still the best course of action in terms of overall monetary policy.”

In afternoon trading, the dollar was up slightly against the yen to 106.92 yen. It also rose against the Swiss franc, sterling, and Canadian dollar

This week is also crammed with major U.S. economic data on consumer confidence, revised fourth-quarter growth, manufacturing and personal income and spending.

Analysts also said investors were cautious about taking big positions this week due to political events in Europe.

Italians vote in a national election on Sunday, while the leading political parties in Germany will decide on a coalition deal that could secure Angela Merkel a fourth term as chancellor.

Euro zone inflation data due later this week further added to a nervous outlook for euro trading.

On Monday, European Central Bank President Mario Draghi spoke before the European Parliament and struck an optimistic tone about the euro zone economy. He said, however, that inflation has yet to show more convincing signs of a sustained upward adjustment.

In late trading, the euro was up 0.1 percent against the dollar at $1.2312.

Reporting by Gertrude Chavez-Dreyfuss; Editing by Jonathan Oatis and Cynthia Osterman