LONDON: The dollar was broadly steady on Monday but looked likely to push higher, boosted by prospects of the US Federal Reserve winding down its stimulus programme while other major central banks keep their monetary policies ultra-loose. The dollar lost some ground against the euro after Purchasing Managers' Index (PMI) data showed manufacturing activity in the euro zone stabilised in June, with the index rising to a 16-month high of 48.8. Analysts, however, said that the euro was unlikely to see significant gains against the dollar in coming months, as the US economy was likely to outperform the euro zone. The dollar index, traded at 83.132, not far from a four-week peak of 83.344 hit on Friday. It had recovered all the way from a 80.498 trough in just eight sessions, despite speculators cutting their bets in favour of the dollar. "This prevailing tone of dollar-positive sentiment is set to remain as the uncertainty around Fed tapering, which put a lot of pressure on the dollar, is more or less gone," said Lutz Karpowitz, currency analyst at Commerzbank. In a week filled with central bank policy decisions and economic data, Friday's report on US payrolls will be critical. A strong reading would fan speculation about an early paring back of the Fed's $85-billion-a-month bond-buying, lifting both Treasury yields and the dollar. Rising yields and an improving domestic economy give the US currency a big advantage over the euro and yen where policy is expected to stay super-easy for a long time to come. The euro was up 0.3 percent at $1.3040. Resistance was cited at its 100-day moving average of $1.3065. The dollar rose 0.5 percent to 99.58 yen, trading close to a near four-week high of 99.73 yen hit earlier. A reported options expiry at 99.50 yen could keep the pair close to that level. Stop loss orders were cited above 99.60 yen. "Technically, the dollar/yen seems firmly supported at the bottom of Ichimoku cloud and it looks like it could test the cloud top near 101.30 yen," said Bart Wakabayashi, head of forex at State Street Global Markets in Tokyo. In contrast to the Fed, the Bank of Japan is set to stick to its massive quantitative easing campaign and the European Central Bank is likely to emphasise that the euro zone economy also still needs help. "We expect the ECB to continue emphasising that extraordinary accommodative policies will continue, and that it has other options if looser monetary policy is needed," said analysts at RBC Capital Markets. Also holding policy meetings this week are the Bank of England and the Reserve Bank of Australia. The Australian currency touched a three-year low of $0.9110 early Monday and traders foresee it testing 90 cents.

Source