The Fed's preferred inflation measure nears its 2% target

Matthew Sheridan of AllianceBernstein

Matthew Sheridan of AllianceBernstein

The central bank is widely expected to stand pat on policy and investors will be watching for hints of a rate hike in June. The US dollar rose to 0.9907 Swiss franc from 0.9879 Swiss franc, and it increased to 1.2841 Canadian dollars from 1.2834 Canadian dollars.

"The euro's downturn is expected to continue in the near term amid receding prospects of the European Central Bank embarking on monetary tightening", said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

Consumer spending, meanwhile, rose for the first time in three months.

In late NY trading on Monday, the euro was down to $1.2081 from $1.2123 in the previous session, and the British pound decreased to $1.3749 from $1.3784 in the previous session, Xinhua news agency reported. The Fed raised rates last month and forecast at least two more rate hikes for this year. "Given the positive sentiment and the lack of liquidity, it doesn't take much for the dollar to move higher", said Valentin Marinov, Head of G10 FX Strategy at Credit Agricole. Yields on 10-year TIPS (Treasury Inflation-Protected Securities) re-acted the same, down to 0.7762% from 0.7829%.

Most analysts had been negative on the dollar this year, predicting that a splurge in US government borrowing and a USA administration keen on a weaker currency would dent the dollar at the same time as investors flocked back to the euro zone. -China trade dispute and tensions over North Korea's nuclear programme eased.

Other data last week showed that while US economic growth slowed to an annualized rate of 2.3 percent in the first quarter, wages and salaries shot up 0.9 percent during the same period. But some have feared that the combination of higher spending with record-low unemployment could overheat the economy and spur massive price increases.

The yield on the benchmark 10-year Treasury note was slightly lower at around 2.944 percent at 12:28 p.m. ET, while the yield on the 30-year Treasury bond slipped to 3.106 percent.

Investors are increasingly expecting that the Federal Reserve will ramp up its plans for 2018 interest rate hikes, due to strengthening domestic inflation and generally solid USA ecostats.

"Economists expect the economy added 185,000 jobs in April, a rebound from March's disappointing headline jobs gain while the unemployment rate is expected to drop to 4% after it held at 4.1% for a sixth-straight month in March", according to Yahoo Finance.

The dollar also pushed past key levels against the Australian dollar AUD=, the Swedish crown SEK=, Swiss franc CHF= and the British pound GBP=. The kiwi fell almost 3 percent in April.

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