The US dollar strengthened on Monday during early trade, weakening other major currencies with the UK pound being the most hit, while gold and silver rallied with the white metal gaining the most.
Fitch lowering the sovereign rating of Japan one notch to 'A' saw the yen weaken slightly, but the reaction in the currency was rather muted as the announcement came towards the end of the local markets.
Fitch warned that the Japanese government's move to lower the corporate tax rate increases uncertainty about whether the country will generate enough revenue to address its debt burden.
The current rating is five notches below the top AAA rating and the outlook is stable.
The week is marked for the FOMC rate decision and preliminary GDP data from the UK as well as US for the first quarter even as a weak Eurozone situation continues to impact markets.
"Market consensus does not expect the first rate hike to be announced at this week's meeting, but comments are likely going to be closely watched especially in light of Q1 GDP which is also due to be released this Wednesday," a UBS analysis published on Monday showed.
Meanwhile, analysts said that it will be interesting to see the impact of bad weather on the US growth data. The consensus is for the annualised growth rate to slow down to 1% from 2.2%, recorded for the last quarter of 2014.
Forecasters have predicted the UK economy to have expanded 2.6% from a year earlier in the first three months of this year, down from 3% in the previous quarter. The sequential rate is seen down to 0.5% from 0.6%. The UK data will be out on Tuesday, a day earlier than the US numbers.
With regards to gold and silver, experts link the rally off the last week's lows to technical buying.
At 11am GMT, the USD index was at 97.06, from the previous close of 96.89 and off Friday's three-week low of 96.76. Over the past two weeks, the dollar index has fallen 2.5% and the days remaining are crucial for the future course of the greenback.
Anything significantly negative from the US will take the index through the 96.17-95.47 support zone to levels like 92.0 and even 90.0, but if the numbers and rhetoric surprise the markets on the hawkish side, then new highs above the mid-March high of 100.40 will be a certainty.
The UK currency has fallen 0.4% on the day to $1.5129, moving off Friday's seven-week high of $1.5188. The euro too dropped 0.4% from the previous close and hit a low of 1.0825 distancing from Friday's over two-week high of 1.0901.
Data from Eurozone and UK Monday morning were mixed with import and export price index for Germany coming in higher than expected while the CBI industrial trends survey index falling behind expectations for the UK.
The yen was down earlier in the day as the dollar rallied but the Fitch announcement aggravated the sell-off in the Japanese currency. The yen was down 0.39% on the day as USD/JPY rallied to 119.43 from Friday's close of 118.965.
Among precious metals, gold and silver rallied while platinum and palladium showed weakness. Traders said while fundamentals like dollar strength etc weighed on the metals value, buying helped gold and silver.
"Gold's break below short-term technical levels and the fact that it breached the 50-day moving average aggravated the (upward) move," the UBS note showed.
The absence of a resolution after the latest Eurozone meeting suggests that shorts are likely to think twice before aggressively rebuilding positions, the investment bank said.
Silver rallied more than 1.2% to $15.89/oz on Monday, moving off the one-month low of $15.703 on Friday. Intra-day in the previous session, the white metal traded as low as $15.56.
Gold strengthened 0.4% on the day to $1183.73 from the previous close of $1179.13. The yellow metal had fallen to a one-month low of $1174.10 before closing higher on Friday.