Forex - Australia dollar gains in early Asia in light data day, yen flat

Investing.com - The Australian dollar gained in early Asia on Monday with the yen flat in a light data day.

AUD/USD traded at 0.7782, up 0.11%, while USD/JPY changed hands at 120.04, flat. EUR/USD was quoted at 1.0823, up 0.03%.

On Monday, the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was quoted at 98.07, up 0.02%.

Last week, the dollar was sharply lower against the other major currencies on Friday, capping its worst weekly performance against the euro in three years and posting the largest weekly decline against the yen and the Swiss franc in two months amid doubts over how quickly U.S. interest rates will rise.

The sharp drop in the dollar came about amid uncertainty over the path of U.S. monetary policy after the Federal Reserve downgraded its forecasts for growth and inflation and lowered its interest rate projections on Wednesday.

The Fed statement dampened expectations for a mid-year rate hike, prompting investors to exit positions which would benefit from a strong dollar.

Despite the past week’s reversal the dollar looks likely to continue to strengthen, with the Fed still expected to raise interest rates ahead of other central banks.

The euro has fallen around 10% against the dollar so far this year and the European Central Bank’s trillion-euro quantitative easing program, which launched earlier this month, is set to continue to act as a drag on the single currency.

In the week ahead, investors will be focusing on Tuesday’s U.S. inflation report after Fed Chair Janet Yellen warned last week that the stronger dollar was pushing down inflation.

Survey data on euro zone private sector activity, due for release on Tuesday, will also be closely watched.

On Monday , the U.K. is to release private sector data on industrial order expectations.

The U.S. is to release a report on existing home sales.