Investing.com - The dollar turned lower against the other major currencies on Monday as investors took a breather following a rally to two-and-a-half month highs, but losses were held in check as a rate cut by China underpinned market sentiment.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, slid 0.24% to 96.95, easing back from Friday’s highs of 97.3.
EUR/USD was up 0.28% to 1.1048, off Friday’s lows of 1.0995, the weakest since August 11.
USD/JPY slid 0.44% to 120.94, 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.
Central bank announcements by the Bank of Japan and the Reserve Bank of New Zealand later in the week were also in focus.
NZD/USD was up 0.21% to 0.6766 amid expectations that the RBNZ would keep rates on hold at Thursday's meeting after cutting rates three times so far this year.