Dollar Weakens as Investors Anticipate Fed's Interest Rate Decision

By Saqib Iqbal Ahmed

NEW YORK (Reuters) - The dollar weakened across the board on Monday as investors wait for the Federal Reserve to resume interest rate cuts at this week's meeting and as President Donald Trump renewed calls for faster monetary policy easing.

Trump on Monday called for Fed Chair Jerome Powell to enact a "bigger" cut to benchmark interest rates and pointed to the housing market in a social media post ahead of the U.S. central bank's meeting this week.

Traders are fully pricing in a 25 basis point cut at the Federal Open Market Committee meeting on September 16 and 17, and about a 5% chance of a 50 basis point cut, according to the CME FedWatch Tool.

"What we see is just a broad-based lack of conviction, with traders relatively happy to sit on the sidelines and wait until the outcome of Wednesday's FOMC meeting is known," Michael Brown, market analyst at online broker Pepperstone in London, said.

"In the meantime, it's likely just positions being squared up to drive things for the next day or so," Brown said.

The dollar index, which measures the currency's strength against a basket of six peers, slipped 0.4% to a nearly one-week low of 97.273.

Against the Japanese currency, the dollar was 0.2% lower at 147.335 yen, while the euro advanced 0.3% to $1.1771.

The U.S. dollar has steadied since a record slide earlier this year, but many currency market players still view the greenback as locked in a bearish trend.

Investors will parse Fed members' "dot plot" projections for rates and guidance from Fed Chair Jerome Powell to gauge the extent and pace of further easing.

"The economic projections and press conference are likely to emphasize that this is an 'insurance' cut, with the pace of easing remaining gradual," Nomura analysts said in a note on Monday.

Investors are also monitoring rate decisions this week in Japan, Britain, Canada and Norway.

Both the Bank of England and the Bank of Japan are expected to keep rates unchanged, with analysts focusing on the BoE's plans to slow its reduction of government bond holdings and on BOJ commentary that might indicate the likelihood of a rate hike over the remainder of the year.

On Monday, the euro was little swayed by Fitch Ratings' late-Friday downgrade of France's sovereign credit score due to concerns over the government's rising debt burden. The move stripped the euro zone's second-largest economy of its AA- status. 

The downgrade was largely priced in by the markets in advance, said Nick Rees, head of macro research at Monex Europe.  

Analysts say that, while fiscal worries in France could limit the euro's gains in the near term, they are unlikely to spur a meaningful decline in the currency. 

Data shows that speculative net long positions in the euro against the U.S. dollar continue to hold strong, ticking up to $18.4 billion as of the week ended September 8, near a two-year peak.

The euro's resilience is underpinned by expectations of Federal Reserve policy easing alongside diminishing prospects for further European Central Bank rate cuts.

Sterling was 0.4% higher at $1.3606 on Monday, its strongest since early July.

Cryptocurrency bitcoin <BTC=> was down 0.5% at $115,323, slipping for a third straight session.

(Reporting by Saqib Iqbl Ahmed; Additional reporting by Jaspreet Kalra and Rae Wee; Editing by Jan Harvey, Christina Fincher and Edmund Klamann)