Investing.com - The dollar regained some ground against other major currencies on Tuesday, as sentiment on the greenback improved ahead of the Federal Reserve's highly-anticipated policy statement due on Wednesday.
The U.S. Commerce Department earlier reported that housing starts declined by 17.0% last month to hit 897,000 units from January’s total of 1.081 million units, worse than expectations for a decline of 2.4% to 1.049 million.
The report also showed that the number of building permits issued last month increased by 3.0% to 1.092 million units from January’s total of 1.060 million. Analysts expected building permits to fall by 0.5% to 1.065 million units in February.
Market participants were eyeing Wednesday’s Fed statement to see if it would drop its reference to being patient before raising rates and signal that it is ready to hike rates depending on economic data.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.20% to 99.93, still close to Friday's highs of 100.78, the strongest since September 2003.
EUR/USD rose 0.35% to 1.0604.
The euro found support after the ZEW Centre for Economic Research said that its index of German economic sentiment rose by 1.8 points to 54.8 this month from February’s reading of 53.0. Analysts had expected the index to improve by 5.2 points to 58.2 in March.
The index of euro zone economic sentiment increased to a 13-month high of 62.4 in March from 52.7 in February, above forecasts for a gain to 58.2.
A separate report showed that euro zone consumer price inflation fell 0.3% last month, in line with expectations and unchanged from a preliminary estimate. Euro zone inflation declined by 0.6% in January.
The rate remains firmly below the European Central Bank's target of near but just below 2%.
The dollar held steady against the yen, with USD/JPY at 121.30. Earlier Tuesday, the Bank of Japan maintained its stimulus program but cut its inflation outlook, citing temporary declines in oil prices.
Japan's annual core consumer inflation slowed to 0.2% in January, well below the BOJ's 2% target.
Meanwhile, the dollar pushed higher against the pound, with GBP/USD down 0.64% to 1.4735 and remained lower against the Swiss franc, with USD/CHF sliding 0.35% to 1.0039.
The Australian, New Zealand turned broadly lower, with AUD/USD shedding 0.25% to 0.7622 and NZD/USD retreating 0.66% to 0.7318.
Meanwhile, USD/CAD was little changed at 1.2774.
Statistics Canada reported on Tuesday that manufacturing sales dropped 1.7% in January, compared to expectations for a 1.0% decline, after a 1.6% rise the previous month.