The index rose 8% last year in its biggest annual jump since 2015 on the back of the Fed raising interest rates to tackle inflation. The dollar is likely to consolidate as "market activity gradually picks up this week," said Christopher Wong, currency strategist at OCBC Bank in Singapore.
"The market obviously wants to believe that tinkering with the yield curve cap is not once and done," Moh Siong Sim, currency strategist at Bank of Singapore, adding that the market was looking for further signals that there would be more tweaks to the yield curve control settings. Investor attention this week is fixed on the minutes of the Fed's December policymaking meeting, which are due to be released on Wednesday, with traders looking for clues to what rate path is likely to be taken in 2023.