Finance

Dollar rises from one-month low on prospect of higher interest rates

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  • Dollar bounces vs euro ahead of ECB meeting
  • Central bank meetings, data later in week add risk
  • Commodity-linked currencies rise further

NEW YORK/LONDON, Oct 25 (Reuters) - The dollar rose from a one-month low on Monday, ahead of central bank meetings and economic data coming later this week, boosted by the prospect of a tighter U.S. monetary policy.

The upward move came at the expense of the euro, the Japanese yen and the Swiss franc.

"There's so much event risk on tap this week and the dollar has underperformed over the last two weeks that the market's starting to buy back the dollar," said Joseph Manimbo, senior market analyst at Western Union Business Solutions.

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The dollar index was up nearly 0.2 at 93.8150 for the day after having fallen during trading in Asia to a one-month low following comments on Friday from Federal Reserve Chair Jerome Powell that affirmed plans to cut back on bond purchases.

At one point the dollar index was up 0.4% on the day as yield on the 10-year U.S. Treasury rose. Then dollar eased off, as did the 10-year yield, which was last around 1.63%.

"Broadly speaking, the dollar is taking its cue from the 10- year, but there's been a bit of decoupling on the notion that other central banks appear poised to raise rates before the Fed," Manimbo said.

Traders are awaiting U.S. economic growth data and central bank meetings in the euro zone, Japan and Canada later this week that could move exchange rates.

The euro lost 0.3% to $1.1610 . The European Central Bank meets on Thursday. While a big change is seen as unlikely, comments from the bank could shine shift views on how much inflationary pressures could impact interest rates.

"There is no way that they (ECB policymakers) can't acknowledge that inflation has run higher, but also they do not want to get dragged into a game of expectations given the ECB's dovish proclivities," said Jeremy Thomson-Cook, chief economist at payments firm Equals Money.

"Alongside inflation and growth data due this week, we will be able to mark the European economy a lot better against its UK and U.S. counterparts, something we expect to continue to allow for additional euro weakness moving forward."

The dollar chalked up gains versus the Japanese yen, rising 0.2% to 113.50 yen . The Bank of Japan meets later this week but like the ECB, it is not expected to shift from its dovish policy stance.

Thursday's U.S. gross domestic product figures -- if they show an expected slowdown -- could take some pressure off the Fed even while inflation runs relatively hot.

Cryptocurrency with bitcoin was up 4% at $63,168, a bit below heights reached last week around $67,000.

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Currency bid prices at 10:00AM (1400 GMT)

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Reporting by David Henry in New York and Tommy Wilkes in London. Editing by Peter Graff and Shinjini Ganguli

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