(Adds comment, updates prices, changes byline, dateline;
* Dollar recovers slightly after falls last week
* Investors price in Fed rate hike on Wednesday
* Sterling falls then rises on new Scottish referendum call
By Gertrude Chavez-Dreyfuss
NEW YORK, March 13 The dollar edged higher from
two-week lows on Monday, recovering after Friday's bout of
profit-taking following a robust U.S. jobs report, as investors
looked to this week's Federal Reserve's policy meeting in which
it is expected to raise rates by a quarter percentage point.
"We remain bullish on the dollar, but as Friday's events
suggested, a lot of good news is already priced into the dollar
at current levels," said Shaun Osborne, chief FX strategist, at
Scotiabank in Toronto.
"Yields are high enough and spreads are wide enough to keep
the dollar broadly supported against its major currency peers
for the moment, but additional gains will likely hinge on the
messaging from the Fed at the FOMC."
The Federal Open Market Committee will hold a two-day
monetary policy meeting, which starts on Tuesday. Fed funds
futures on Monday have priced in a nearly 90-percent chance the
Fed will hike rates on Wednesday.
Sterling, which has been one of the worst performers against
the dollar over the last two weeks, rose half a percent after
the devolved Scottish government demanded the right to hold a
new referendum on independence.
In late morning trading, the dollar was slightly higher
against a basket of currencies at 101.31 and was
marginally up against the euro. The single European currency was
last at $1.0664.
The dollar index earlier fell to a two-week low of 101.01.
Friday's solid jobs number cemented the case for a rise in
U.S. interest rates this week that will long predate any rise in
Britain is expected to formally lodge its request to leave
the European Union, but was given another curve ball from
Scottish First Minister Nicola Sturgeon's call for a new
referendum on independence.
But Sturgeon's timeframe for the referendum, which at the
earliest could happen by the end of next year when Brexit
negotiations are expected to be concluded, partially eased
concerns about the issue adding to more political risk over the
next 12 months.
Sterling, as a result, held gains against the dollar rising
0.5 percent to $1.2229.
Against the yen, the dollar slipped 0.1 percent to 114.68
Scotiabank, in a research note, said there is speculation on
the potential for changes at the Bank of Japan, including a
possible shift to 10-year government bond yield target range
from the current zero level. This is considered positive for the
(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Patrick Graham in London; Editing by Nick Zieminski)