NEW YORK (AFP) - The dollar edged higher against its main rivals, drawing strength from the expected decision Tuesday by the US Federal Reserve to hike US interest rates.
The euro fetched 1.2173 dollars, from 1.2198 late Friday in New York.
Against the yen the dollar traded at 109.87 from 109.76 on Friday.
The Federal Open Market Committee (FOMC), the policymaking arm of the US central bank, was widely expected to raise interest rates by a quarter percentage point Tuesday to take the Fed funds target rate to 1.75 percent.
"With little significant economic data due out ahead of the rate decision, traders seem to be backing some modest dollar appreciation," said Chris Callander, senior foreign exchange dealer with CMC Group.
Higher rates would boost the appeal of dollar-based investments to foreign investors.
Investors will be keeping a close eye on a Fed accompanying statement for indications as to whether there will be a further increase at the November meeting.
Most analysts expect to see the Fed maintain its optimistic assessment of the US economy and to further reinforce Fed chairman Alan Greenspan's view that momentum was regaining traction.
UBS analyst Mansoor Mohiuddin said he expected the Fed to indicate that inflationary expectations had moderated but that growth had strengthened.
"This suggests the Fed will keep its tightening bias while continuing to remind the market that future rate hikes will only occur at a measured pace," he said.
On the other hand, any hint that the Fed might take a pause from raising interest rates in November would likely unsettle the market and would be bad news for the dollar, analysts said.
In late New York trade, the dollar stood at 1.2713 Swiss francs from 1.2674 Friday.
The pound was at 1.7857 dollars after 1.7907 on Friday.