Dollar Gains Amid Geopolitical and Economic Tensions

The dollar strengthened against the euro and sterling amid modest currency movements and geopolitical tensions following the U.S. operation in Venezuela. Upcoming U.S. macroeconomic data could influence Federal Reserve policy. The market anticipates two U.S. rate cuts this year and awaits President Trump's decision on the next Fed chair.

The dollar commenced the first full trading week of the new year on a high note, achieving a 3-1/2-week peak against the euro and gaining ground on sterling.

The currency shifts on Monday remained subdued, yet the United States' daring operation in Venezuela, capturing President Nicolas Maduro for drug-trafficking charges, poses a potential sentiment risk. This week's U.S. macroeconomic indicators might prove pivotal for Federal Reserve policy decisions, starting with the ISM readings on Monday and leading up to the monthly non-farm payroll figures on Friday.

In trading, the dollar incrementally increased by 0.1% to $1.1705 per euro and reached a high of $1.170025 for the first time since December 11. The American currency also rose 0.1% to $1.34495 against the British pound and similarly gained 0.1% to 156.90 yen.

Market expectations have included two potential U.S. rate cuts this year, contrasting with the divided Federal Reserve board's projection of a single cut. Investors are also keenly awaiting whom President Donald Trump will nominate as the next Federal Reserve chair, with Jerome Powell's current term set to expire in May.

President Trump has committed to announcing his choice for the Fed chair this month, expressing that his selection will favor significantly lower interest rates.

(With inputs from agencies.)