The U.S. dollar made a tentative start to the week on Monday as investors awaited testimony from Federal Reserve Chair Jerome Powell and looked towards a February jobs report that will likely influence how hawkish the U.S. central bank will be.
The dollar index, which compares the U.S. currency to six major peers, fell 0.057% to 104.560. However, it was not far from a seven-week high at 105.36. Last week's weekly loss was the first since January.
The Fed raised interest rates 25 basis points last year after delivering jumbo increases. However, a host of resilient economic data has fuelled market fears that it might return to its aggressive course.
Futures suggest a 72% chance that the Fed will raise interest rate by 25 basis points at its March 22 meeting.
The spotlight will be firmly on the February jobs report scheduled for Friday and Fed Chair Jerome Powell's testimony to congress on Tuesday and Wednesday.
"U.S. underlying inflation remains stubbornly high well above the Fed's inflation target of 2%," said Joseph Capurso, head of international and sustainable economics at Commonwealth Bank of Australia.
Recent data suggest that consumer spending is not slowing much, while the labor market is unsustainably tight, Capurso said in a note, adding that Powell would likely be hawkish in his testimony.
Citi strategists anticipate Powell will indicate a preference to a 25-bps increase but not rule out other options, as he will speak before the release of the jobs data.
Citi expects an increase in payrolls of 255,000 following January's enormous 517,000 jump. A large surprise on the upside could lead to a 50 bps hike from the Fed, Citi said.
Meanwhile, the euro was down 0.02% to $1.0632, having gained 0.8% last week.
The Japanese yen strengthened 0.01% to 135.85 per dollar, while sterling was last trading at $1.203, down 0.08% on the day.
The spot market saw the onshore Yuan open at 6.9072 dollars and close at 6.9067. China's annual session of the National People's Congress kicked off on Sunday and set a modest goal for 2023 economic growth at 5%.