By Virginia Harrison, MarketWatch SYDNEY (MarketWatch) — The U.S. dollar strengthened against most major currencies on Monday as investors sought out the safe-haven appeal of the U.S. unit. The dollar index (DXY 77.18, -0.10, -0.13%) , which measures the U.S. unit against a basket of six currencies, traded at 77.29, up from 77.24 in late North American trade on Friday. The euro (EURUSD 1.3762, +0.0005, +0.0363%) eased slightly to $1.3746 from $1.3749 in North American trade on Friday. See real-time currency quotes and tools. Against the Japanese yen (USDYEN 81.6300, -0.0300, -0.0367%) , the dollar gained to ¥81.68, from ¥81.66 in North American trade on Friday. Political unrest in the Mideast and North Africa has supported the oil price in recent weeks, but has failed to drive traditional risk-aversion buying in the U.S. dollar. Whenever investors are risk-averse, they tend to purchase perceived safe-haven assets such as gold and low-yielding currencies like the U.S. dollar and Japanese yen. “Although investors are concerned about political turbulence in the Middle East, they also think that the U.S. dollar may not be the best safe haven for these particular circumstances, given the U.S.’s exposure to higher oil prices and politics in the Middle East,” said analysts at Barclays Capital. “Commodity currencies (especially the Canadian dollar) are a good hedge against oil price inflation,” the analysts said. “The Australian dollar with its large energy exports (coal and LNG) is also a reasonable hedge against higher energy prices in general,” they added. Against the Canadian dollar, the U.S. dollar (USDCAD 0.9773, -0.0012, -0.1226%) was buying 97.73, down from 97.73 Canadian cents late Friday. The Australian dollar (AUDUSD 1.0167, +0.0022, +0.2168%) bought U.S. $1.0167, down 0.1%. Interest-rate decisions are expected to support currency movements this week, with the European Central Bank, the Bank of Canada and the Reserve Bank of Australia meeting. The Australian central bank is the first to meet on Tuesday. “The market expect the Reserve Bank of Australia to remain on hold, which leaves the rhetoric in its accompanying statement in focus. With only one 25 basis point rate hike almost fully priced by year end, the risk is that the Reserve Bank of Australia’s rhetoric surprises on the hawkish side,” analysts at Barclays Capital said. The European Central Bank is also expected to keep rates steady when it meets on Thursday. “We still view an immediate tightening as quite unlikely. The policy statement should signal further upside risks to the inflation outlook,” analysts at Credit Agricole said. “We now look for the European Central Bank to hike rates twice in the second-half of 2011, by 25 basis points in September and 25 basis points in December,” they added. Meanwhile, the British pound (GBPUSD 1.6113, +0.0003, +0.0186%) extended its weakness against the U.S. dollar, falling to $1.6089, from $1.6094 on Friday.

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