Investing.com – The dollar fell against a basket of major currencies after data showed inflation remained subdued ahead of the Federal Reserve’s two- day policy meeting slated for Tuesday.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell by 0.28% to 94.44.
Fresh on the heels of posting its best weekly gain of 2017, the dollar came under pressure after investors mulled over a duo of reports showing inflation continued to stutter while consumer spending notched its biggest monthly increase since August 2009.
The Federal Reserve's preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, rose 1.3% in the 12 months through September.
That was in-line with expectations but well below the Fed’s 2% target, fuelling expectations that the trend of subdued inflation will keep interest rates lower for longer.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, jumped 1% last month, the Commerce Department said on Monday.
The duo of reports comes amid ongoing speculation concerning President Donald’s Trump choice of candidate to replace Janet Yellen as head of the U.S. central bank.
President Donald Trump is likely to pick Federal Reserve Governor Jerome Powell to replace current Fed chair Janet Yellen, Reuters reported on Monday, citing a source familiar with the matter.
Trump is expected to announce his choice on Thursday, prior to his five-nation trip to the Asia Pacific region as the U.S. seeks to curb North Korea’s growing nuclear threat.
The tumble in the dollar, however, is not expected to continue as data showed that traders abandon some of their bearish bets on the greenback.
The value of the dollar’s net short position was $8.02 billion in the week ended Oct. 24, down from net shorts of $12.65 billion the previous week, according to data from the Commodity Futures Trading Commission data released on Friday.
The pound and euro were the main beneficiaries of the slump in the dollar as both currencies hit session highs.
EUR/USD fell rose 0.26% to $1.1638, up 0.26% while EUR/GBP fell 0.27% to £0.8811.
GBP/USD added 0.59% to $1.3209, as investors anticipated an upcoming Bank of England rate hike for the first time in more than a decade on Thursday.
USD/CAD rose 0.12% to C$1.2825 while USD/JPY fell 0.49% to Y113.13.