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Markets expect the Fed to keep rates on hold at 5.25 per cent for several months before trimming them towards the end of the year. This contrasts with expectations for the European Central Bank, where speculation is skewed towards two more interest rate increases this year to four per cent.
In Japan, the central bank raised interest rates to a decade high of 0.5 per cent last week, with minutes from the meeting due to be released tomorrow.
Bank of Japan chief Toshihiko Fukui has already signalled that any further tightening will be a slow process and has also warned price trends could slip back into negative territory.
Euro
The euro continued to maintain a strong foothold against the dollar, only to have marginally slipped after climbing as high as $1.3189 levels, its highest since early January.
The dollar's fall follows soft economic data and tamer than expected comments from Fed Chairman Ben Bernanke recently, which revived talk of the Fed coming round to the idea of trimming interest rates this year.
Meanwhile, data showing an unexpected pick-up in the US core consumer prices in January supported the dollar as it reinforced the view that US interest rates will not fall anytime soon.
The greenback, however, lost momentum and declined versus the euro.
This week a string of economic indicators from all major economies is likely to keep currency trading on a more volatile note.
Germany reports preliminary February consumer price data tomorrow, with markets waiting to see if the recent VAT hike accelerates inflation not only in the eurozone's largest economy, but also in the region as a whole.
Last week's range: $1.3078 to $1.3189 (Dh4.8085 to Dh4.8445)
Range for this week: $1.3000 to $1.3300 (Dh4.7752 to Dh4.8854)
Sterling
Sterling initially slipped against the dollar at the start of the week after the minutes from the Bank of England's February policy meeting showed a 7-2 vote in favour of maintaining interest rates at 5.25 per cent, as expected.
However, the latter part of the week witnessed the pound shaking off its negative trend and rise against the euro and the dollar after a Bank of England policymaker expressed concern about inflationary pressures, rekindling talks of an interest rate hike.
Britain has a series of data this week that should shed more light on whether the three interest rate hikes since August are slowing down the housing market.
Tomorrow brings a February Hometrack house price survey, while the British Bankers Association's January mortgage approvals data is due on Tuesday and the January Land Registry house price index on Wednesday.
Last week's range: $1.9430 to $1.9652 (Dh7.1366 to Dh7.2181)
Range for this week: $1.9500 to $1.9800 (Dh7.1623 to Dh7.2725)
Yen
The yen slipped against the dollar and the euro pressured by growing expectations that an interest rate hike by the Bank of Japan is unlikely to curb the selling of the currency.
The yen tumbled to a record low against the euro after Bank of Japan raised key interest rates for the first time since July but suggested further tightening would be gradual.
The euro pushed up to a high of 159.13 yen, the highest since the single currency was launched in 1999 and up 1.3 per cent for the year.
The move also left investors still willing to fund carry trades using yen.
The yen hit a one-year low against the New Zealand dollar as investors saw the BoJ's slow pace of tightening policy as more reason to favour high-yielding currencies over low-yielding ones like the yen.
This week Japan's inflation data for January, due on Friday, may determine how long the Bank of Japan waits before tightening monetary policy again this year.
Inflation is expected to remain tepid with the January CPI seen steady on the year, after rising 0.1 per cent in the previous month.
Last week's range: 119.20 yen to 121.63 yen (Dh0.030198-Dh0.030813)
Range for this week: 119.80 yen-122.80 yen (Dh0.029910-Dh0.030659)
- HSBC Global Markets Middle East
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