Dollar rose in European trade against a basket of major rivals for the fourth straight session, hitting two-week highs and moving off eight-month lows on active short-covering.
However, the greenback is still heading for the fourth monthly loss in a row after data showed US inflation slowed down for the sixth straight month, hitting 14-month lows.
Such data bolstered the case for a 0.25% rate hike only this week instead of 0.5% as interest rates approach neutrality.
The Index
The dollar index rose 0.4% to 102.60, the highest since January 18, with a session-low at 102.12.
The dollar index rose 0.3% yesterday, the third profit in a row away from eight-month lows at 101.50 while US 10-year treasury yields rebounded.
Monthly Trades
The dollar index is currently down 0.9% in January on track for the fourth monthly loss in a row, the longest such streak since May 2020.
The dollar was hurt heavily this month and sent to eight-month lows after US inflation data showed a slowdown in December consumer prices for the sixth month in a row.
Such data reduced pressure on policymakers and bolstered the case for reduced rate hikes and easier policies.
The Fed
The Federal Reserve is convening this week to decide on policies, expected to issue a reduced rate hike of 0.25% this time around.
Will the dollar sustain more losses this week?
If the Fed's monetary policies and statements were less aggressive than expected, it could send the dollar to fresh multi-month lows.