U.S. dollar rises as caution reigns ahead of key central bank meetings

The dollar on Monday gained for a third straight session as traders cut their bearish bets on the greenback to four-month lows amid the recent rise in U.S. Treasury yields and grew cautious ahead of key global central bank meetings.

The Federal Reserve, Bank of England, and Bank of Japan are all set to meet this week and will likely set the tone as to where global rates are headed.

U.S. Treasury yields, however, were lower on Monday in line with Europe, ahead of these central bank gatherings. Benchmark 10-year Treasury yields traded as high at 1.639% on Monday, close to Friday’s top of 1.6420%, a level last seen in February 2020.

Rising U.S. yields have lifted the greenback 2% so far this year thanks to widening interest rate differentials relative to other major bond markets. The dollar declined by more than 4% in the last quarter of 2020.

“The U.S. dollar has been one of the best-performing G10 currencies in recent weeks reflecting a shift in expectations regarding Fed interest rate policy,” said Jane Foley, senior FX strategist, at Rabobank in a research note.