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Dollar slips before Fed meeting, US-China trade talks

Matt Cardy | Getty Images

The dollar was little changed against a basket of currencies on Monday as traders were cautious about staking new positions ahead of the Federal Reserve's two-day policy meeting and trade talks between China and the United States.

Safe-haven demand for the dollar dried up as the U.S. government started to reopen after a record long shutdown, and investors were bracing for a slew of economic figures that had been postponed.

"This could be the calm before the storm," said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York. "It feels like a consolidation day with a risk-off bias."

The euro reached a 10-day high against the greenback as investors consolidated positions before votes in the British parliament on Tuesday aimed at breaking a Brexit deadlock.

At 3:16 p.m., the ICE index that tracks the dollar versus the euro, yen, sterling and three other currencies was down 0.04 percent at 95.75. It hit a near two-week low at 95.673 earlier Monday.

Policy makers on the Federal Open Market Committee (FOMC) begin meeting on Tuesday. They are expected to signal a pause in tightening and acknowledge growing economic risks.

"The Fed will most likely keep rates steady this year, given the state of economic growth outside the U.S.," said Sim Moh Siong, currency strategist at Bank of Singapore. U.S.-China talks resume on Tuesday and Wednesday to see if the world's two largest economies can end their trade dispute.

The euro rose to a near two-week peak at $1.1438. It last traded up 0.11 percent at $1.1425. Recent economic readings on Germany and France have been weak and the European Central Bank is expected to remain dovish. Still, traders believe these factors are already priced into the euro.

Sterling declined following its biggest weekly rise in more than 15 months. With the United Kingdom set to leave the European Union March 29, lawmakers have set votes in parliament on Tuesday over terms for Brexit.

The pound was down 0.33 percent at $1.3158, while the euro was up 0.11 percent at 1.1425.