The dollar drifted higher in modest fashion after a quiet start to the week as all eyes turned to the specter of record oil prices and their damaging effects on global growth. Oil prices are now above 60 usd a barrel and threatening to push to fresh records, dominating the headlines everywhere and casting a significant shadow over the proceedings in the currency market. The dollar is attempting to regain its upward momentum especially after the euro, in its short lived rally, was unable to reach its first significant resistance point of 1.2225 usd, said Naeem Wahid at HBOS. Yesterday, the euro had some good news when the German Ifo survey suggested that some growth may be returning. "A sustained move higher in the coming months would suggest a coming improvement in German GDP and indeed global growth. However, at the moment the rising oil price remains a significant shadow," said Wahid. The impact of high oil prices on different currencies were varied. The dollar rose slightly higher as oil is priced in the US currency. The yen meanwhile, came under pressure as Japan is a net oil importer. For the euro, the impact was less clear. BNP Paribas analysts said higher oil prices will make the European Central Bank even more reluctant to lower the cost of borrowing. The ECB will be more reluctant to cut rates as long as it is unsure about oil price induced spill-over effects into inflation. Wahid at HBOS believes it will provide further support for the dollar. "We look for upside risk to this economic release," he said. That aside, the highlight of the week is expected to come on Thursday when the US Federal Open Market Committee makes its interest rate decision. While a quarter-point hike to take the benchmark rate to 3.25 pct is widely expected, there is also some worry that the rate setters may tone down their rhetoric. Some believe the Fed may hint that it will soon take a pause from the hiking cycle which has taken the benchmark Fed fund rate from 1 pct to 3 pct over the span of just one year. If the softening in tone does come, the dollar may dip.