Investing.com - The dollar slipped lower against the other major currencies on Monday, as markets paused after the greenback's broad rally sparked late last week by signs of potential easing in the euro zone and a surprise rate cut in China.
The dollar was lower against the yen, with USD/JPY sliding 0.42% to 120.98, after rising to two-month highs of 121.47 late Friday.
The dollar rallied late last week after European Central Bank President Mario Draghi signaled that further monetary easing is likely later this year.
The comments underlined the diverging monetary policy stance between the Federal Reserve and other central banks. The Fed is currently expected to start hiking interest rates sometime in early 2016.
On Friday, the People’s Bank of China unexpectedly cut interest rates in an effort to shore up slowing growth in the world’s second largest economy.
It was the sixth rate cut since last November, reinforcing the divergence in monetary policy between the U.S. and central banks in the rest of the world.
Investors were looking ahead to Wednesday’s monetary policy announcement by the Fed for fresh indications on the timing of an initial rate hike.
EUR/USD added 0.15% to trade at 1.1033, off Friday’s lows of 1.0995, the weakest since August 11.
Earlier Monday, data showed that the IFO’s business climate index for Germany fell to 108.2 from 108.5 in September, but was better than expectations for a reading of 107.8.
The current conditions index fell to 112.6, from 114 a month ago, but the expectations index rose to 103.8, from 103.3.
Elsewhere, the dollar was lower against the pound, with GBP/USD up 0.22% at 1.5341 but higher against the Swiss franc, with USD/CHF edging up 0.25% to 0.9809.
The Australian and New Zealand dollars were stronger, with AUD/USD gaining 0.42% to 0.7255 and with NZD/USD rising 0.27% to 0.6769.
Meanwhile, USD/CAD fell 0.22% to trade at 1.3138.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.20% at 96.99, off Friday's two-month highs of 97.30.