The U.S. dollar gained ground Monday as investors shied away from risk-oriented trades ahead of this week's meeting of U.S. Federal Reserve policy makers and a summit of the leaders of the Group of 20 global economic powers.
A holiday in Japan curtailed volume in Asia, while a lack of major economic data kept activity under wraps in Europe, strategists said.
Meanwhile, ideas the Fed's rate-setting Open Market Committee could opt Wednesday to signal it's ready to begin outlining an exit strategy from its massive monetary-stimulus efforts helped pressure equity markets, spurring support for the dollar, analysts said.
The single currency changed hands at $1.4662, down slightly from $1.4720 in North American trade late Friday.
The dollar rose to 92.24 yen versus the Japanese currency, up from 91.43 yen Friday.
The British pound fell across the board, fetching $1.6185 versus the dollar compared to $1.6269 Friday. The euro rose to 90.57 pence, up from 90.49 pence Friday.
The dollar index (DXY 76.83, +0.28, +0.36%) , a measure of the greenback against a trade-weighted basket of rival currencies, rose to 76.895, up from 76.446.
European equity markets were lower and U.S. stock index futures pointed to a negative start for Wall Street. See Europe Markets. Read Indications.
Dollar/yen broke higher Monday morning "as investors became nervous regarding the outcome of Wednesday's FOMC meeting," wrote strategists at BNP Paribas, in a note to clients.
"The talk is that the Fed might signal an exit from its quantitative easing," they said, while noting "there have been six consecutive months of declining credit suggesting that easy monetary conditions have not yet impacted final credit supply and demand."
The greenback has tended to rally when economic fears are on the rise and to fall when investors are more inclined to take on risk. Dollar weakness has been exacerbated in recent weeks amid signs the greenback is taking on a role as a funding currency for carry trades, in which investors sell a low-yielding currency and purchase higher-yielding currencies.
Nervousness ahead of the G20 summit, which gets under way Thursday in Pittsburgh, has also spurred traders to exit pro-risk trades, said Boris Schlossberg, director of currency research at GFT.
"If the talk out of the G20 actually turns into some concrete policy action, the news of further government regulation of capital markets could cast a pall over risk assets and precipitate a profit taking sell off that many analysts have been anticipating for weeks," Schlossberg said.
