The dollar rose back towards a 20-year high on Monday as the euro struggled around the $1.05 mark, with investors preparing for a busy week of central bank meetings including a likely Federal Reserve interest rate hike.

The Euro also came under pressure after a survey showed that Euro zone manufacturing output growth stalled last month as factories struggled to source raw materials, while demand took a knock from steep price increases.

Markets in Asia and London were closed for public holidays, so trading was quiet.

Investors are expecting the Fed to hike rates by 50 basis points when it meets on Tuesday and Wednesday. The uncertainty is around how hawkish Fed chair Jerome Powell will sound in comments following the decision.

Markets are pricing in an aggressive run of rate hikes from the Fed as it tries to tame soaring inflation.

That, together with an expected slower rate of European Central Bank tightening and worries about the impact of the war in Ukraine on the euro zone economy, has sent investors scrambling for dollars and left the euro at five-year lows. The dollar index gained 5 per cent in April, its best monthly performance since January 2015.

“We expect the dollar to stay strong versus the euro, as a hawkish FOMC (Federal Open Market Committee) stance and geopolitical concerns will support the dollar,” UBS Global Wealth Management wrote in a research note.

“Short-term investors may look to sell rallies in EUR-USD above $1.08."

The wealth manager has lowered its euro/dollar forecasts to $1.05 for June from a previous $1.11, $1.06 for September, $1.08 for December and $1.10 for March 2023. The dollar index was last at 103.36, up 0.1 per cent on the day. The euro lost 0.2 per cent to $1.0525.

BNP Paribas strategists feel big speculative flows and not concerns about a worsening economic outlook explained the euro’s slide to a five-year low below $1.05 this week.