The U.S. dollar strengthened against its major counterparts in the European session on Monday, as a steady improvement in the U.S. labor market kept alive hopes for a Fed rate hike at its March meeting.

Fed funds futures are pricing in a 61.6 percent chance for a quarter-point rate increase to 1.50 percent - 1.75 percent in March, according to CME.

Comments from Fed officials supporting rate hike also underpinned the currency.

The U.S. job market is overall strong, which makes it appropriate for a gradual increase in the fed funds rate at this point, Cleveland Fed President Loretta Mester told CNBC on Friday.

"I think we're basically at maximum employment from the view of monetary policy," she added.

Speaking at an American Economic Association conference, San Francisco Fed President John Williams suggested that three rate hikes this year looks appropriate in the light of strengthening economy. "We're in a pretty good situation: the economy is doing great, everyone expects us to raise rates gradually," he said.

With today's economic calendar being light, investors await U.S. import prices, producer prices, consumer confidence and retail sales numbers due this week for more direction.

The currency has been trading in a positive territory in the Asian session.

The greenback climbed to a 10-day high of 1.1983 against the euro, compared to 1.2027 hit late New York Friday. The greenback is likely to find resistance around the 1.18 region.

Data from Destatis showed that German factory orders declined more than expected in November.

Factory orders decreased 0.4 percent month-on-month, reversing a revised 0.7 percent rise in October. Orders were forecast to drop 0.2 percent.

The greenback advanced to more than a 2-week high of 113.39 against the yen and held steady thereafter. The pair ended last week's deals at 113.02.

The greenback reached as high as 0.9784 against the franc and moved sideways thereafter. If the greenback rises further, 0.99 is possibly seen as its next resistance level.

The greenback edged up to 1.3524 against the pound, off its early 5-day low of 1.3585. The greenback is seen finding resistance around the 1.34 area.

Reversing from an early low of 0.7873 against the aussie, the greenback hit a 2-day high of 0.7827. On the upside, 0.77 is likely seen as the next resistance for the greenback.

Survey from the Australian Industry Group showed that Australia's construction sector continued to expand in December, although at a much slower rate, with a Performance of Construction Index score of 52.8.

That's down sharply from 57.5 in November, although it remains above the boom-or-bust line of 50 that separates expansion from contraction for the 11th consecutive month.

U.S. consumer credit for November is set for release at 3:00 pm ET.

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