The dollar gained today ahead of a Federal Reserve policy meeting this week that is widely expected to end with a higher federal funds rate.
Economists generally agree the Federal Open Market Committee will raise rates by 25 basis points tomorrow, adding to rate rises delivered in June and August.
The expected increase would lift the rate to 1.75 per cent. The dollar has benefited from rising interest rates and expectations for higher rates to come because higher rates burnish the allure of short-term, dollar-denominated deposits.
So markets are focused on Fed signals on policy after a rise this month, as recent weak data has raised doubts over the strength of the US economy and, in turn, the pace of the Fed's monetary tightening campaign.
Low interest rates were one factor that helped drive the dollar to a record low against the euro earlier this year. After two hikes in June and August the prospect for future rate hikes was more uncertain given weaker-than-expected data out recently. However, many do not expect a dramatic change in the Fed's tone.
After tomorrow's Fed meeting, markets will look to data later in the week on home sales and durable goods orders to signal whether the economy is pulling out of a soft patch and gaining "traction," as Fed chief Alan Greenspan has said.
The market was also watching the price of oil, which raced above $46 a barrel after Russia's Yukos oil firm suspended some oil exports to China. Traders also remained concerned about storm-related disruptions of supply into the United States.