Dollar steady ahead of central bank meetings

The dollar index eased slightly to 100.20, but remained perched near last week’s 10-month ​high

The dollar held near a 10-month high on Monday in a tentative start to the week, as investors braced for ​a slew of central bank meetings under the shadow of the U.S.-Israel war on Iran.

At least eight central banks, including the U.S. central bank, the European Central Bank, the Bank of England and the Bank of Japan meet this week to set rates, in their first policy meetings since the Middle East war began.

Focus will be on policymakers’ assessment of the impact of higher oil prices on inflation and growth.

The war poses downside risk to economic growth and upside risks to inflation, so central bank ​responses will very much depend on the recent context, specifically whether inflation has been above, on, or below target, said Carol Kong, a currency ​strategist at Commonwealth Bank of Australia.

Ahead of the meetings, the dollar retraced some of last week’s strong gains, leaving the ⁠euro rising slightly from a 7-1/2-month low hit earlier in the session to trade 0.14% higher at $1.1433.

Sterling was up 0.17% at $1.3245, though was not far from ​the 3-1/2-month low it hit on Friday as it clocked a 1.5% weekly decline.

The dollar index eased slightly to 100.20, but remained perched near last week’s 10-month ​high.

Meanwhile, the prospect of easing global energy disruptions sent oil prices down slightly, but markets remained in disarray with geopolitical tensions still running high and uncertainty over ​when the war, now in its third week, could end.

As things stand now, the likelihood we will really see a change in current trajectory for central banks and their monetary ‌policies around ⁠the world are, in our view, very, very limited, said Jorry Noeddekaer, head of global emerging markets and Asia at Polar Capital, whose base case is for the war to be relatively short-lived.