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 Worries that the U.S. economy is stalling, following a run of
weaker-than-expected data, have seen the dollar lose around 4
percent in the past six weeks as expectations of an interest rate
rise in June have faded. But many still expect the Fed to lift rates
in September.
U.S. housing index data and consumer confidence numbers, due at 1300
GMT (9.00 a.m. EDT) and 1400 GMT (10.00 a.m. EDT) respectively,
should provide the greenback with some near-term direction, analysts
said, though the main focus will be on the Fed's statement at the
end of its policy meeting on Wednesday.
The dollar index, which measures the greenback against a basket of
major currencies, fell around half a percent to 96.927 <.DXY>, its
weakest since April 6.
"There's been disappointment with the U.S. data – that's clear, and
that's feeding into the dollar price action," said Phyllis Papadavid,
senior global FX strategist at BNP Paribas in London. "But people
are in wait-and-see mode ahead of the Fed."
Benefiting from the dollar's weakness, the euro gained half a
percent to trade at a three-week peak of $1.0945.
The euro was also boosted by renewed hopes that cash-strapped Greece
could secure extra funding. That followed the news that Prime
Minister Alexis Tsipras had reshuffled his team handling talks with
European and IMF lenders, effectively sidelining embattled Finance
Minister Yanis Varoufakis.
Tsipras said he was confident of reaching an outline deal before a
meeting of euro zone finance ministers on May 11, a day before
Greece must pay 700 million euros to the IMF.
"Varoufakis's hard-ball tactics have been a source of huge
frustration for the Brussels group of international creditors," said
Ray Attrill, global co-head of FX strategy at NAB.
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"The appointment of a more conventional negotiator, more familiar
with the European bureaucracy, has stoked optimism that a deal will
be reached before large payments are due in May."
As the dollar fell across the board, the Australian dollar was the
biggest gainer, rising more than 1 percent to hit a three-month high
of $0.7947 as a rally in iron ore prices raised expectations the
Reserve Bank of Australia will not cut interest rates when it meets
next week.
The Swiss franc, meanwhile, fell to a three-week low of 1.04765
against the euro, with traders speculating the Swiss National Bank
was intervening to weaken the currency.
(Additional reporting by Ian Chua in Sydney and Shinichi Saoshiro in
Tokyo; Editing by Hugh Lawson and Susan Fenton)
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