Dollar edges lower as investors cautious ahead of Yellen

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The dollar edged lower on Monday as U.S. Treasury yields dipped and traders consolidated Friday's gains on low volume to start the holiday-shortened U.S. trading week.

Investors were trading cautiously ahead of remarks from Federal Reserve Chair Janet Yellen later on Monday and as investors looked toward U.S. retail sales data and a reading on consumer sentiment due later this week, analysts said.

"We're just seeing some range trading right now," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington. "There's still a caution in the air ahead of big numbers later in the week on the all-important consumer. That's capping upside at the moment."

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The dollar index, which tracks the greenback against six major currencies, rose to 101.34 in Asian trading, its highest since March 15. But that move reversed as North American trading opened and Treasury yields fell.

The index was last down 0.14 percent at 101.04, near its lows on the day.

New York Fed President William Dudley said on Friday that the Fed might avoid raising interest rates at the same time that it begins shrinking its balance sheet, prompting only a "little pause" in the central bank's rate hike plans.

Currency strategist Alvin Tan with Societe Generale in London said the greenback's move overnight was a continuation from Friday following Dudley's comments.

Yellen is expected to make a speech at the University of Michigan's Ford School of Public Policy at 4:10 p.m. on Monday.

Investors will be parsing Yellen's comments to see if she backs Dudley's stance on reducing the U.S. central bank's balance sheet or slowing the pace of interest rate tightening, said Erik Nelson, currency strategist at Wells Fargo Securities in New York.

Pullback in the dollar?

"If she, perhaps, corroborates some of his more hawkish comments, that could support the dollar," Nelson said. He noted, however, that the chair is generally quite measured in her public comments, giving markets little reason to be bullish.

The dollar was little changed against the yen at 110.97 yen, retracing earlier gains.

The euro was 0.05 percent higher against the dollar at $1.0593 after earlier falling to its lowest since March 9.

Volume was lower than usual due to many traders being away for the Passover and Easter holiday breaks.