The dollar strengthened after posting its biggest weekly rise in six weeks as traders abandoned their bearish expectations ahead of the Federal Reserve meeting, which may signal a change in the US monetary policy expectations.
The Fed begins its two-day policy meeting on Tuesday. Recent data pointing to a rise in inflation rate has raised concerns that price pressures in the wake of the post-COVID economic reopening may force policymakers into scaling back early stimulus.
While expectations remain that the Fed will remain on hold until 2023, some believe that the dollar's rally in recent days despite falling US inflation-adjusted bond yields, indicates more caution among investors.
The dollar index, which measures its performance against a basket of currencies, settled around the 90.50 levels, after rising by 0.4% last week, its biggest weekly rise since early May.
The dollar's gains were supported by some unwinding of short bets in the dollar. In the week ended June 8, speculators with net short positions rose to a nearly three-month high at $18.35 billion.
The British pound was the biggest loser among developed currencies after news of Britain's readiness to delay the end of social distancing measures as part of the government efforts to slow the rapid rise in Coronavirus cases.
As for cryptocurrencies, bitcoin traded above $39,000 after surging nearly 10% on Sunday, as Tesla CEO Inc Elon Musk tweeted that the electric car maker will resume allowing bitcoin transactions when miners use more renewable energy.