The dollar rose slightly Monday, with investors still focused on the likelihood of more policy-easing measures from the Federal Reserve that could lessen the U.S. currency's appeal.
With holidays in Japan, Canada and the U.S. keeping trade subdued, the dollar managed a small advance as last week's rallies for the euro and yen lost steam. The lack of any sign of policy coordination among finance ministers at the International Monetary Fund's weekend meetings in Washington weighed on the dollar in early trading, but the greenback recovered ground in New York and the euro reversed a rise above $1.40, The dollar bounced back from a 15-year-low against the yen as investors became worried about more Japanese intervention in markets to counter yen strength.
'There are lots of reasons why the dollar should be fundamentally weaker right now, but they're all known by now,' said Greg Michalowski, chief currency analyst at retail online foreign exchange broker FXDD based in New York.
Late Monday afternoon, the euro was at $1.3877 from $1.3929 late Friday, according to EBS via CQG. The dollar was at Y82.13 from Y82.08, while the euro was at Y113.97 from Y114.33. The U.K. pound was at $1.5873 from $1.5953. The dollar was at CHF0.9647 from CHF0.9637.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 77.500 from 77.255.
'For the time being, $1.40 seems to be an insurmountable barrier for the euro-dollar pair,' said Kathy Lien, director of currency research at GFT Forex in New York. 'As more and more [European Central Bank] officials talk currencies, their comments could be tougher.'
On Friday, the head of the Eurogroup of finance ministers, Jean-Claude Juncker, said in Washington that the euro was too strong and didn't reflect the region's economic fundamentals. His remarks had sent the euro to an intraday low.
Barclays Capital foreign exchange analysts revised their immediate outlook on the euro higher Monday, but cautioned that it would scale down to $1.30 within one year.
'The U.S. data has been better' and should continue to improve while the drag of a higher currency will hurt periphery countries' exports in particular, said Raghav Subbarao, currency strategist at Barclays Capital in London.
Investors continue to watch for more possible Japanese intervention on the yen after the Y2 trillion foray into markets on Sept. 15. Japanese authorities had intervened with the dollar trading at Y82.87, but now the greenback is just above Y82.
To see the dollar's performance against the yen, please see:
http://dowjoneswebservices.com/chart/view/4179
'With the IMF meeting over, the possibility of intervention is increasing,' but the window is also likely short, said Hans Redeker, global head of foreign exchange strategy at BNP Paribas in London.
If Japanese officials act, they would likely not want to do so around the Group of 20 finance ministers' and central bankers' meeting Oct. 22 in Seoul, Redeker said. The wisdom of trying to artificially weaken the yen remains debatable, further complicating a guess, he said.
Currencies linked to global growth fueled by a tie to commodity exports failed to ignite Monday, with the Australian dollar reaching no closer to parity in North American hours. The Australian dollar in recent days has touched as high as US$0.9918, its strongest level versus the U.S. dollar since 1983. Late Monday afternoon, the Australian dollar was at US$0.9843 from $0.9850 late Friday, according to CQG.
South Korean leaders, who will host the Group of 20 leaders' summit in Seoul on Nov. 12, on Monday began pushing for progress on currency issues ahead of the meeting. South Korean officials worry that unless there is progress at the summit, other countries will decide the G-20 isn't the right forum for dealing with critical global economic issues.
'Every country taking part must not pursue only their national interest,' said South Korean President Lee Myung-bak, who will chair the summit.
'If this happens, I fear the recovery and sustainable growth of the global economy will be put into question.'
With the ICE Dollar Index strengthening, Deutsche Bank's PowerShares U.S. Dollar Index Bearish exchange-traded fund was down 0.35% from late Friday, while its PowerShares U.S. Dollar Index Bullish was up 0.40%. The two exchange-traded funds are based on Deutsche Bank currency-futures indexes, whose composition mirrors that of the ICE's Dollar Index.