Bullish on the Dollar

Gains in the dollar, however, could be tempered if there is any position unwinding in the wake of recent gains. Currency speculators hugely increased their bets in favour of the U.S. dollar in the week ended July 2, while turning negative on the euro. Investors had grown increasingly bullish on the dollar after the Fed laid out a roadmap for scaling back its asset purchase programme as the economy improves.

According to Reuters , the European Central Bank last week broke with tradition by declaring it would keep interest rates at record lows for an extended period, a pledge ECB President Mario Draghi reiterated on Monday.

"We remain bullish USD versus the currencies where central banks are signalling continued policy easing, most notably the EUR, GBP, CHF and JPY," analysts at BNP Paribas wrote in a report.

"We are more cautious versus the currencies of commodity exporter economies, where short positioning is generally stretched and where better U.S. data may provide some cushion against the negative effects of China's slowdown in the months ahead."

The move was small, however, falling to 1.2845/50 where bids held it. GBP/USD fell, too, down to 1.4920 before finding support. Again, a very tight range here. NZD and AUD both lost ground too. The Aussie drifted lower in early going (along with EUR and GBP) but got sold a little harder after the slate of data.

Earlier, the dollar pushed up to as high as 101.25 yen. A trader for a European bank in Tokyo said the dollar was buoyed by stop-loss buying by short-term speculators. The trader said he expected the dollar to eventually grind higher, supported by interest to buy the greenback on dips.