Investing.com - The dollar dropped in U.S. trade on Monday with concerns over a travel ban to the U.S. for seven predominantly Muslim countries leading to a move to safe-haven plays such as the Japanese yen and as expectations grow for the Fed to issue cautious language in its latest policy statement on Wednesday.
USD/JPY changed hands at 113.56, down 1.33%, while AUD/USD traded at 0.7550, up 0.04% and GBP/USD at 1.2479, down 0.55%. USD/CAD fell 0.29% to 1.3115.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, eased 0.17% to 100.39.
In earlier trade, the dollar fell more than 1% against the safe haven yen on Monday as the travel ban put in place by President Donald Trump added to concerns over the potential economic ramifications of the new administration's policies.
Trump signed an executive order on Friday that curbed immigration from seven predominantly Muslim countries, adding to questions over the destabilizing impact of the new administration's protectionist policies. The order triggered legal challenges, international criticism, widespread protests and confusion over its implementation at airports.
Sentiment on the greenback was also hit after data on Friday showing a sharp slowdown in U.S. fourth quarter growth prompted speculation that the Federal Reserve will avoid hiking interest rates too quickly.
The Fed, which is to hold its next policy meeting on Wednesday, isn’t expected to raise interest rates, but investors are keen to hear how it views the economic outlook and the future path of interest rates.
Data on Monday showed that U.S. consumer spending increased in December, rising 0.5% after a 0.2% increase in November. Personal income rose 0.3% last month after edging up 0.1% in November.
A separate report showed that U.S. pending home sales rose by 1.6% in December, ahead of forecasts for a 1.1% increase.