Overview

The dollar rose against other major currencies on Monday, rebounding from last week's losses as investors await an interest-rate decision from the Federal Reserve later in the week.

The Federal Open Market Committee, the Fed's policy-setting panel, starts its two-day policy meeting on Tuesday. Economists believe the Fed will almost certainly keep monetary policy on hold for the sixth consecutive meeting, maintaining its federal funds rate target at 5.25%. The Fed will announce its decision at 2:15 p.m. Eastern on Wednesday.

Speculation that the Bank of Japan on Tuesday will leave rates unchanged and signal future rate hikes will remain gradual encouraged traders to reestablish carry trade positions -- in which speculators borrow the yen at low costs and reinvest in high-return currencies.

The highlight so far today has been the move by the AUD/USD to above .8000, a 3 year high, on talk of another rate rise in the next month or so. The move above .8000 has also knocked out an options barrier, and set-up the Aussie for a move to .8080 in coming days, with an outside chance of a move up to around .8200 as the herd mentality sets in. Given that the next RBA meeting is not till 3-4 April, we expect the A$ will remain well supported going into this meeting.

Data for today

US: FOMC

UK: CPI

EU: Retail Sales

For today:

Buy USD/JPY around 117.65, with stops under 117.30