The US dollar traded lower on Monday but continued to approach six-week highs on Friday, after a flurry of economic data bolstered market expectations of tighter monetary policy from the Federal Reserve.
The US dollar index, which measures the US dollar against six other major currencies, slipped 0.1% to 103.91. However, it was still up nearly 1.8% for the month, keeping it on track for its first monthly gain since last September. It hit a six-week high of 104.67 on Friday.
Currency trading on Monday was limited to the U.S. market. closed in conjunction with President's Day.
Data from the world's largest economy in recent weeks showed a still-tight labor market, consumer prices that remained high, strong retail sales and higher producer prices, raising expectations that the U.S. central bank should act. to tame inflation, and that interest rates will continue to be raised.
"The dollar has had quite a bit of movement this month following inflation data and questions about rate hikes," said Chris Turner, head of global markets at ING.
Hawkish comments from Fed officials have also pressured the U.S. dollar, as they signal that interest rates need to rise to reduce inflation.
Sweden's crown currency outperformed after core inflation rose in January, while minutes of the central bank's last meeting showed policymakers backed more rate hikes to control inflation.
The Euro lost 1.1% against the Swedish crown to 11.059 crowns while the US dollar fell 0.8% to 10.3604.
"We now see the Riksbank increasing by 50 basis points in April and 25 basis points in June," said Torbjörn Isaksson, chief analyst at Nordea, which previously saw another 25 basis point increase in April.
"This should support the crown currency and we see it stronger today," Isaksson added, noting the European Central Bank (ECB) and the Fed also looked hawkish.
Two ECB policymakers said on Friday that interest rates in the European zone have some way to go, prompting market prices for the ECB's top rate.
The euro was little changed against the US dollar at $1.0687, just above Friday's six-week low of $1.06125.
“We think the U.S. disinflation process. will have another level in the second quarter, while in Europe, inflation may be more flat," said ING's Turner.
The Australian dollar rose 0.4% to $0.6909 ahead of minutes of the Reserve Bank of Australia's latest policy meeting on Tuesday.
The kiwi rose 0.1% to $0.6249, ahead of the Reserve Bank of New Zealand's (RBNZ) rate decision on Wednesday, where it is expected to cut interest rates by half a point.
