FOREX: Dollar firms as traders look past Venezuela to flurry of US data

TOKYO – The U.S. dollar kicked off the first full trading week of the New Year on a strong note, reaching a 3½-week high against the euro and a two-week peak versus the Japanese yen.

Traders largely brushed aside the weekend U.S. operation in Venezuela and the capture of President Nicolas Maduro, instead focusing on a series of U.S. economic reports this week that could influence Federal Reserve policy.

The dollar rose 0.1% to $1.1704 per euro, earlier touching $1.1700—the strongest level since December 11. Against the yen, it climbed 0.2% to 157.08, reaching a peak of 157.26 earlier—the highest since December 22.

“I dare say the FX complex is not much of a reflection of risks stemming from Venezuela, but more about what the U.S. data is going to tell us about the Fed's policy path,” said Kyle Rodda, senior financial markets analyst at Capital.com.

Recent strong U.S. economic data have led markets to consider a potentially slower pace of interest rate cuts this year. The week’s data begins with ISM manufacturing figures on Monday and culminates with the monthly non-farm payrolls report on Friday.

According to LSEG calculations based on futures, traders are currently pricing in two U.S. rate cuts this year.

Investors are also awaiting U.S. President Donald Trump’s choice for the next Fed chair as Jerome Powell’s term ends in May. Trump has said he will announce his pick this month, noting the successor will be “someone who believes in lower interest rates, by a lot.”

The dollar gained 0.1% to $1.3443 per British pound and rose 0.1% to C$1.3745 against the Canadian dollar. Meanwhile, the Australian dollar slipped 0.2% to $0.6682.

-Reporting by Kevin Buckland; Editing by Sam Holmes and Himani Sarkar/Reuters