Investing.com - The Aussie dropped in early Asia on Monday following a surprise rate cut by China on Friday with the impact expected to ripple through markets over the week.
AUD/USD traded down 0.15% to 0.7216, with the currency's fortunes closely tied to the Chinese economy, while USD/JPY traded at 121.38, down 0.08%.
The dollar received an additional boost after China’s central bank unexpectedly cut interest rates on Friday. It was the sixth rate cut since last November, amid efforts by authorities to shore up slowing growth in the world’s second largest economy.
On Monday, in the euro zone, the Ifo Institute is to report on German business climate.
The U.S. is to release data on new home sales.
In the week ahead, investors will be focusing on Wednesday’s monetary policy announcement by the Federal Reserve for fresh indications on the timing of an initial rate hike.
Friday’s monetary policy announcement by the Bank of Japan will also be closely watched.
Market participants will also be awaiting preliminary estimates of third quarter growth from both the U.S. and the U.K.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was quoted up 0.02% to 97.20.
Last week, the euro fell to two-month lows against the dollar on Friday one day after European Central Bank President Mario Draghi signaled that further monetary easing is likely later this year.
The single currency fell to one-month lows against the yen, with EUR/JPY at 133.83 in late trade, ending the week with losses of 1.23%.
The drop in the euro came after Draghi said the ECB had discussed lowering the deposit rate at its meeting on Thursday and added that that the back could enlarge its asset purchase program or speed up bond purchases.
The comments underlined the diverging monetary policy stance between the Federal Reserve and central banks in the rest of the world. The Fed is currently expected to start hiking interest rates sometime in early 2016.