Dollar Modestly Firmer but in Tight Ranges

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NEW YORK ( BBH FX Strategy) -- The dollar is modestly firmer but remains confined to tight ranges. The euro is holding on to most of last week's gains, helped by the recent shift in interest rate differentials away from the dollar.

The pound is flat ahead of Tuesday's inflation report.

The dollar is softer against the yen, and is also consistent with the recent narrowing of rate differentials, but near-term support is being seen near 83.

Overnight, Reserve Bank of Australia Governor Glenn Stevens provided little guidance on monetary policy but did say the current Australian dollar levels were forcing some sectors in the economy to restructure.

Elsewhere, Apple ( AAPL) is likely to announce a dividend, which may also provide a boost to personal income.

Global shares are mixed, with the MSCI Asia Pacific index up for the fifth consecutive day, while the Nikkei hit a new eight-month peak, closing up 0.1%.

However, European shares are declining from an eight-month high, with the EuroStoxx 600 down 0.4% as bank shares decline by 0.6%. Meanwhile, the EFSF also issues a 20-year bond supply.

The eurozone debt crisis continues to simmer. IMF chief Christine Lagarde warned against complacency even as the IMF released a Greece report on Friday that highlights the risk that further aid will be needed, noting that the country remains "accident-prone."

We note that the lion's share of Greek debt is now in official hands after private sector restructuring, and so further money or debt forgiveness will depend critically on public sector participation.

The Greek credit default swap payout will be determined Monday by International Swaps and Derivatives Association. Meanwhile, a Financial Times column Monday highlights the risks still facing Spain via private sector debt and the housing bubble, and sees further downward adjustment in housing prices still ahead.

Lastly, Italy reported industrial orders for January that were much worse than expected. They were down 7.4% month over month vs. the consensus for a decline of 3.2%. They highlight the precarious economic backdrop for most of the periphery.