After the weekend battering, other currencies wait for the Fed to do so.
The dollar traded steady on Monday, January 24 ahead of the US Federal Reserve's January policy meeting later this week, while the dollar was bruised near a six-month low over the weekend, hurt by a sell-off in technology stocks.
Markets have been put on the leash by the Fed. Frederic Neumann, HSBC's co-head of Asian economics research, said this week it will be another tug and yank.
Attempts to predict when and how quickly central banks will raise interest rates and conclude the programs launched after COVID 19 hit are a major factor driving currency markets at present.
The guidance that Chair Powell might give at his press conference on quantitative tightening later in 2022 will cause investors to scurry, according to Neumann, who said he was not expecting a policy change.
The Fed's Federal Open Market Committee kicks off its two-day meeting on Tuesday, with some analysts saying it's possible, though unlikely, that it will raise interest rates for the first time since the pandemic began.
We consider the higher risk, as the statement from the FOMC shows an urgency to act soon, likely in March, in the face of very high inflation. The urgency could culminate in a decision to halt quantitative easing by mid-February, according to analysts at the Commonwealth Bank of Australia.
A bullish statement and a faster end to the QE programme could encourage markets to price a risk of a 50 bp hike in March, they said, despite the fact that they thought this would lead to a knee-jerk reaction higher in the dollar.
The dollar index, which measures the dollar against six major peers, was steady at 95.682 on Monday morning.
The Bank of Canada's January meeting is on the traders' agenda this week, wrapping up just before the Fed, where a rate hike is possible, and Australian inflation data due on Tuesday, which will guide the Reserve Bank of Australia's position at its meeting next month.
The Aussie dollar was at US $0.7180 on Monday morning, the lowest end of its recent range. The risk-friendly currency sold off last week as traders dumped assets like equities, as well as riskier assets like cryptocurrencies.
It was at US $36,026, its lowest point since July 2021, having fallen 10 per cent on Friday and dropping as low as US $34,000 on Saturday.
Since its record peak of US $69,000, the world's largest coin has nearly halved its value.
The sell-off hurt most digital assets, and ether, the world's second-largest criptocurrency was at US $2,516, the world's second-largest criptocurrency, hit its lowest level since July on Saturday, which was US $2,300.
Traders say that as institutional investors increase their exposure to cryptocurrencies, their moves are more closely correlated with other risk assets.
The Nasdaq Composite lost 7.55 per cent last week, its worst week since March 2020.
In traditional currency markets, sterling was near a two-week low at US $1.3551 and the euro was at US $1.1333.
The yen was at the stronger end of its recent range, with a dollar at 113.7 not far from the 113.47 touched 10 days earlier. A fall below that level would be a five-week low for the dollar.