The dollar edged lower on Monday but kept close to Friday's six-week high, after a flurry of economic data reinforced market expectations of tighter monetary policy from the Federal Reserve.
The U.S. dollar index =USD , which measures the dollar against six other major currencies, slipped 0.1% to 103.91. It is still up almost 1.8% for the month, keeping it on track for its first monthly gain since last September. It hit a six-week high of 104.67 on Friday.
Liquidity is expected to be thin on Monday, with U.S. markets closed for Presidents' Day.
Data from the world's largest economy in recent weeks has pointed to a still-tight labour market, sticky consumer prices, robust retail sales and higher producer prices, raising expectations the U.S. central bank had more to do to tame inflation, and that interest rates would rise.
But with markets expecting the Fed funds rate to peak just under 5.3% by July, analysts said the move in the dollar may have run its course. FEDWATCH
"The dollar has had quite a big move this month on the back of rates repricing and the question is how much further that's going to run," Chris Turner, global head of markets at ING said.
"I'd say the majority of what we're calling a 'corrective rally' in the dollar has been seen," Turner added.
Hawkish comments from Fed officials have also underpinned the U.S. dollar, as they signalled interest rates would need to rise to quash inflation.
Sweden's crown outperformed after core inflation ticked up in January, while minutes from the central bank's last meeting showed policymakers backed more rate hikes to bring inflation under control.
The euro EURSEK=D3 fell 1.1% against the Swedish crown to 11.059 crowns while the dollar SEK=D3 was down 0.8% to 10.3604.
"We now see the Riksbank hiking by 50 basis points in April and 25 basis points in June," said Torbjörn Isaksson, chief analyst at Nordea, who previously saw one more 25 basis point rise in April.
"This should support the crown and we are seeing it stronger today," Isaksson added, while noting the European Central Bank (ECB) and Fed have also sounded hawkish.
Two ECB policymakers said on Friday that interest rates in the euro zone have some way to rise, pushing up market pricing for the peak ECB rate.
0#ECBWATCH The euro EUR=EBS was little changed against the dollar at $1.0687, just above Friday's six-week low of $1.06125.
"We think the U.S. disinflation process will have another leg in the second quarter, while in Europe, inflation is likely to be stickier," ING's Turner said.
"Euro rates are probably likely to stay at higher levels, whereas we think dollar rates will more easily turn lower," Turner added, which he said could support the euro in the first half of the year.
The dollar was down 0.1% against the yen to 134 JPY=EBS . It hit a two-month high of 135.12 yen on Friday.
The Australian dollar AUD=D3 rose 0.4% to $0.6909 ahead of the minutes from the Reserve Bank of Australia's latest policy meeting on Tuesday.
The kiwi NZD=D3 rose 0.1% to $0.6249, ahead of a Reserve Bank of New Zealand (RBNZ) rate decision on Wednesday, where they are expected to scale down to a half-point interest rate increase.
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