The dollar was little changed against the other major currencies on Monday as concerns over the direction of U.S. monetary policy lingered after the Federal Reserve surprised markets with a decision to keep its stimulus program unchanged.
During European late morning trade, the dollar was lower against the yen, with USD/JPY down 0.38% to 98.99.
The dollar weakened after the Fed said last week that it wanted to see more evidence of a sustained economic recovery before it adjusted the scale of its bond buying program.
The decision surprised markets, which had been expecting the U.S. central bank to cut its USD85 billion-a-month stimulus program by USD10 billion to USD15 billion.
The greenback found some support after St. Louis Federal Reserve President James Bullard said Friday the decision not to taper in September was “close” and indicated that there could be a small reduction in bond purchases in October.
Elsewhere, the euro drifted lower against the dollar, with EUR/USD slipping 0.14% to 1.3504.
The euro touched session lows after data showed that manufacturing output in the euro zone was weaker than expected this month, but this was offset by an improvement in service sector activity.
The preliminary reading of the euro zone manufacturing purchasing managers’ index fell to 51.1 in September from a final reading of 51.4 in August. Analysts had expected the index to inch up to 51.8.
However, the euro zone services PMI rose to 52.1, the highest level since June 2011, from 50.7 in August and above expectations for a reading of 51.1.
Germany’s manufacturing PMI fell to 51.3 in September from a final reading of 51.8 in August, compared to expectations for an improvement to 52.2.
The German services PMI rose to a seven month high of 54.4 from a reading of 52.8 in August. Analysts had expected the index to tick up to 53.1
Demand for the euro continued to be underpinned after German Chancellor Angela Merkel’s conservative party won general elections on Sunday, securing her a historic third term in office. Political party leaders were due to meet later Monday to discuss coalition talks.
The pound pushed higher against the dollar, with GBP/USD rising 0.18% to 1.6033.
The dollar edged higher against the Swiss franc, with USD/CHF up 0.21% to 0.9127.
Elsewhere, the greenback was slightly lower against its Australian, New Zealand and Canadian counterparts, with AUD/USD advancing 0.18% to 0.9423, NZD/USD climbing 0.16% to 0.8383 and USD/CAD dipping 0.03% to trade at 1.0303.
The Australian dollar was boosted after data released on Monday showed that the preliminary reading of China’s HSBC manufacturing PMI rose to a six-month high of 51.2 in September, up from 50.1 in August.
Economists had forecast a reading of 50.9.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, inched up 0.02% to 80.55.