NEW YORK (AFP) - The United States dollar weakened broadly Monday after tepid US data left the market cautious ahead of a Federal Reserve monetary policy decision this week.
The market generally is expecting the Federal Open Market Committee (FOMC), the Fed's policy arm, will remove the "patient" language regarding an increase in interest rates from its statement Wednesday US time (2am Thursday Singapore time) after a two-day meeting.
A batch of mediocre US economic indicators on Monday supported the view that the Fed's rate hike could possibly come later rather than as soon as June, when many Fed watchers have expected it.
According to Fed data, manufacturing struggled in February, holding back overall industrial production that only rose 0.1 percent in the month because of heavy heating demand at utilities during unusually cold winter weather.
Reports on homebuilder sentiment and regional manufacturing also were weaker than expected.
"Softer US data drove the US dollar lower against most of the major currencies," said Kathy Lien of BK Asset Management.
"This has led investors to believe that the Fed is going to be more cautious on Wednesday, even though we think they will remove the word 'patient.'" The dollar pulled back from a 12-year high against the euro, which fetched $1.056 compared with $1.0489 late Friday.
Following the FOMC statement, the Fed also will release its latest forecasts for US economic growth, unemployment and inflation and Fed Chair Janet Yellen will hold a press conference.
"The statement and Chairwoman Yellen will emphasize that the timing of a tightening will be data-dependent in an attempt to prevent the prospect of a hike at the mid-June FOMC becoming a certainty in the market mindset," said XE Currency Blog.