By Gina Lee
Investing.com – The dollar was up on Monday morning in Asia over worries triggered by fresh COVID-19 outbreaks in some Asian countries. However, investors are heavily positioning for a fall in the U.S. currency as the U.S. Federal Reserve sticks to its current dovish policy.
The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched up 0.06% to 90.373 by 1:08 ET (5:08 AM GMT).
The USD/JPY pair inched up 0.01% to 109.36.
The AUD/USD pair was down 0.24% to 0.7753, with the Reserve Bank of Australia due to release the minutes from its latest meeting on Tuesday. The NZD/USD pair fell 0.52% to 0.7216.
The USD/CNY pair inched up 0.03% to 6.4384. Chinese industrial production growth slowed down to 9.8% year-on-year in April, according to data released earlier in the day.
The GBP/USD pair inched down 0.04% to 1.4090. However, the pound was near a two-and-a-half-month high as the U.K. reopens its economy after a four-month lockdown.
The greenback was boosted by easing commodity prices and the COVID-19 outbreaks in Singapore and Taiwan, where there were a record 206 new cases, with both countries tightening restrictive measures. Singaporean primary, secondary, junior college and Millennia Institute students shifted to full home-based learning from May 19 till the end of the school term on May 28.
However, a bounce from higher-than-expected U.S. inflation data released during the previous week faded over mounting investor expectations that the Fed will keep interest rates low.
Investors are also looking to the Fed’s minutes from its April meeting, due to be released on Wednesday, for further clues on the central bank’s next steps.
"We expect the minutes ... to reiterate that policymakers consider the pickup in inflation to be transitory," Commonwealth Bank of Australia (OTC:CMWAY) currency strategist Kim Mundy told Reuters.
"The upshot is that we do not expect the (Fed) to consider tapering its asset purchases soon," she said. "The dollar is expected to resume its downtrend this week after last week's CPI-inspired boost,” Mundy added.
Investors increased bets against the dollar during the previous week, mostly turning towards the euro and pound to a lesser extent, as Europe and the U.K. continue their path towards economic recovery.
In cryptocurrencies, bitcoin last traded 4.85% weaker at $44,191 after hitting its lowest since February on Sunday. Ether was 4.96% lower at $3,362. Market volatility continued over the weekend as Tesla Inc. (NASDAQ:TSLA) CEO Elon Musk took to Twitter, where he hinted at Tesla possibly selling its bitcoin holdings.