The dollar was little changed yesterday, having retreated from gains made late last week on stronger-than-expected US jobs data, as traders awaited a host of central bank meetings this week. The US currency pulled away from a five-week high hit against the euro on Friday, as a rise in oil prices prompted slight dollar selling.
Analysts said euro/dollar would stick to narrow trading ranges before the European Central Bank's (ECB) policy announcement. Before that, the Federal Reserve will issue an interest rate decision.
Most economists expecting both central banks to keep rates unchanged, with the Fed expected to stress its ongoing worry about inflation while acknowledging that conditions in the financial sector remain fragile. Focus will also be on ECB's President Jean-Claude Trichet's post-meeting statements to see if he will keep his rate-tightening bias due to inflation risks, having raised rates by 25 basis points to 4.25 per cent in July.
"The ECB will continue to sound hawkish, because they continue to worry about inflation rather than growth," said Paul Robson, strategist at RBS Global Banking.
The Bank of England will also meet this week, and is seen keeping rates on hold.
Many in the market expect the Reserve Bank of Australia may soon cut rates from 7.25 per cent in the face of a weakening economy, which would be its first monetary loosening in seven years.