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Dollar fell against major currencies ahead of key economic data, FOMC and rate decision

The Dollar fell against a basket of currencies on Monday, breaking a three-day rally, as buyers retreated to the sidelines ahead of key economic data and the Federal Reserve's policy meeting this week. Analysts said the Dollar would likely stay confined to current trading ranges, awaiting a push from either the Federal Open Market Committee (FOMC) statement accompanying its interest rate verdict or first-quarter growth numbers, both due on Wednesday. The policy-setting FOMC is widely expected to cut the benchmark overnight lending rate by only 25bp to 2% at the end of a two-day meeting, and signal that its interest rate-cutting campaign is over for now. Growing speculation that the Fed might stop cutting interest rates and a rise in U.S. stocks on takeover deals earlier lifted the Dollar and global sentiment improved last week amid stronger-than-expected US corporate earnings and a growing view that the worst of the credit crisis has passed.

EurUsd climbed 0.24% to 1.5656, snapping a three-day decline. But it was still about 3cts below last week's record high of 1.6019. UsdJpy dropped 0.53% to 104.11 after touching 104.82 intraday high. UsdChf was lower by 0.25% at 1.0337. GbpUsd rose 0.39% at 1.9913 after posting 1.9781 – 1.9965 extreme low and high.

Comments from European Central Bank’s officials repeating their warnings about persistent inflation lent the Euro mild support. ECB President Jean-Claude Trichet and Governing Council member Yves Mersch both said risks to price stability remained on the upside, with Trichet adding that there were no grounds for complacency. Their comments suggested the ECB is not ready to start cutting interest rates from 4% soon, even with regional data pointing to an inflation slowdown in four German states for April. A surprise jump in a gauge of German consumer sentiment also helped the Euro, as it indicated that the euro zone's biggest economy may be in better shape than indicated by last week's weak Ifo business confidence survey.