Currencies: Dollar posts biggest monthly rise since January

The dollar edged higher on Monday, cementing its best monthly performance since the beginning of the year as investors braced for a long awaited interest-rate increase by the Federal Reserve, which many expect to be delivered in December.

The ICE dollar index DXY, +0.12%  was up 0.2% on the day to 100.16 late Monday in New York. It rose as high as 100.31 earlier in the session, its highest level since March.

The gauge gained 3.4% in November, its biggest monthly performance since a 5% gain in January, according to FactSet data.

Investors are now looking ahead to a busy week that features several central-bank policy decisions—including what many believe will be an unveiling of further easing measures by the European Central Bank—and a spate of U.S. economic data, with Friday’s November nonfarm payrolls report at the top of the marquee.

“A lot of people are positioning, getting ready for the rest of the week, because the fireworks start in a few hours,” said Colin Cieszynski, chief markets strategist at CMC Markets, referring to policy decisions by the Reserve Bank of Australia and the Reserve Bank of India.

U.S. data released Monday, including a an optimistic reading on pending home sales, had little impact on the dollar, strategists said.

Currency trading in November was dominated by signals from central bank officials. ECB President Mario Draghi and his colleagues reiterated that the central bank would likely implement further easing, which may involve expanding its massive bond-buying program and cutting its already-negative deposit rate.

Fed officials, most notably Chairwoman Janet Yellen and Vice Chairman Stanley Fischer, assured markets that the Fed believes the U.S. economy could stomach a rate increase. The euro shed 4% in November to trade at $1.0568 late Monday, its lowest level since mid-April. It traded at $1.0593 late Friday.

The British pound traded higher Monday after a strong reading on third-quarter economic growth in the U.K. But the currency shed 2.4% against the dollar in November, largely due to comments by Bank of England Chief Economist Andy Haldane, who said the U.K. doesn’t need a rate increase in the near future.

The pound traded at $1.5059 Monday, compared with $1.5032 late Friday.

The yen shed 2% of its value in November, driven lower by comments from Fed policy makers. One dollar USDJPY, +0.22%  bought ¥123.08 Monday, compared with ¥122.76 late Friday.

The Bank of Japan bucked investor expectations in October by declining to expand its own program of asset purchases, but many market strategists, including Boris Schlossberg, managing director of currency strategy at BK Asset Management, believe the central bank must ease further to boost lagging economic growth.

The Fed will announce whether or not it’s raising interest rates on Dec. 16.

In other currency trading, the Chinese yuan USDCNH, -0.3506% traded at the offshore rate edged higher on Monday after the International Monetary Fund decided to add the currency, also known as the renminbi, to its Special Drawing Rights basket. One dollar bought 6.43 yuan late Monday.

Read: What you need to know about China’s inclusion in IMF currency basket

—Sara Sjolin contributed to this report.

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