The dollar thrashed its cuts on Monday after soft U.S. data expanded wagers the Federal Reserve will cut rates later this year while the pound floated close to nine-months high on hopes for a delay in Britain's exit from the European Union.
The dollar's index versus a basket of six major pears edged down 0.1 percent to 96.481, after having shed 0.81 percent a week ago, the largest loss since late August.
Weaker-than-prediction U.S. financial data on Friday cemented anticipations the Fed could strike a dovish stance this week, sending U.S. bond outputs down to 10-week lows.
U.S. industrial yield tumbled 0.4 percent in February, flagging for a second straight month, while factory activity in New York State was weaker than expected this month with an index reading of 3.7.
The 10-year Treasuries yield dropped to as low as 2.580 percent its lowest since Jan. 4, however Fed funds futures priced in about 40 percent chance of a rate cut present year, compared with nearly zero percent seen prior this month.
"The 10-year yield closed below 2.6 percent, for the second time this year after closing below that level only on one day at the beginning of year," said Chotarto Morita, chief strategist at SMBC Nikko Securities.
"If it stays below that level sustainably, it will be the first time since January 2018, when yields started rising on expectations of accelerating growth and inflation following tax cuts. Yields are slipping back as U.S. economic sentiment is cooling down," he said.
In contradiction of this background, numerous investors anticipate the Fed to recommend rates will be on hold in the near future and to reveal a plan to end its financial statement runoff later this year in its gathering ending on Wednesday.
"The focus is on how dovish the Fed will be. I got the impression that markets have gone a bit too far in expecting rate cuts. There's a risk such views will be rolled back if the Fed's dot plots show the board members still expect a rate hike this year," said Ayako Sera, market economist at Sumitomo Mitsui Trust Bank.
As the dollar drops steam, other major currencies increased by default. The euro edged up to $1.1336, flat in early Monday trade having gained 0.86 percent, the largest weekly gain since late September.
The Australian dollar responded more, gaining 0.4 percent to a two-week high of $0.7115 .
The dollar fetched 111.50 yen, minimal changed on the day but off Friday's nine-day high of 111.90.
The British pound stood not far from last week's nine-month high of $1.3380, supported by relief that a no-deal Brexit will likely be prevented. It last stood at $1.3292.
It is not clear if British Prime Minister Theresa May can protect support for her Brexit deal in the parliament, which has twice rejected her offer by an extensive margin.
May has only three days to win support for her deal to leave the European Union if she wants to go to a conference with the alliance's leaders on Thursday.
May is cautioning hard-line Brexiteers that if they accepted her Brexit divorce deal, Britain's exit from the European Union could face a long deferral and could involve taking part in the alliance's parliamentary elections.
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