The U.S. dollar opened the first full trading week of the new year on a stronger footing, climbing to a three-and-a-half-week high against the euro and posting gains versus sterling.
Currency movements were relatively contained early on Monday, but market sentiment remained cautious after a bold U.S. operation in Venezuela led to the capture of President Nicolas Maduro, who is set to face drug-trafficking charges in New York. The geopolitical development continued to hover over global markets as a potential risk factor.
Key U.S. data and Fed outlook in focus
Attention now turns to a heavy slate of U.S. economic data that could influence the policy outlook of the Federal Reserve. The week begins with the ISM survey and concludes with the closely watched monthly non-farm payrolls report on Friday.
The dollar edged up 0.1% to $1.1705 per euro, after earlier touching $1.170025, its strongest level since December 11. Against the British pound, the greenback also gained 0.1% to $1.34495, while it strengthened 0.1% versus the Japanese yen to 156.90.
Markets are currently pricing in two U.S. interest rate cuts this year, compared with just one projected by a divided Federal Reserve board.
Fed leadership speculation adds to uncertainty
Investors are also closely watching who U.S. President Donald Trump will nominate as the next Fed chair, with the term of current chair Jerome Powell set to end in May.
Trump has said he plans to announce his choice later this month and has reiterated that his preferred candidate will strongly support significantly lower interest rates.
