Forex - Dollar edges flat to lower as market awaits fresh Fed cue

The dollar traded flat to lower against most major currencies on Monday as investors avoided the greenback ahead of the release of the Federal Reserve's minutes from its July policy meeting on Wednesday, which markets hope will provide clues on the fate of stimulus programs.

Stimulus tools such as the Fed's USD85 billion monthly bond-buying program weaken the dollar to spur recovery, and talk of their dismantling can bolster the currency. 

In U.S. trading on Monday, EUR/USD was up 0.08% at 1.3338 in a quiet, late-summer session void of major data.

A lack of U.S. data kept investors on the sidelines to await the release of the Fed minutes.

Mixed economic indicators out of the U.S. in recent weeks have created uncertainty over when tapering will begin, with many investors betting on September and others pegging an announcement in December.

Elsewhere, Germany’s Bundesbank on Monday said the European Central Bank’s commitment to keeping rates low to spur recovery doesn't mean the monetary authority won't take action to curb rising inflation rates down the road.

In its monthly report, Germany’s Bundesbank said the euro zone economy would benefit from record low interest rates set by the ECB, though the report added that the ECB’s pledge to keep borrowing costs low for an extended period would depend on the medium-term inflation outlook.

The greenback, meanwhile, was down against the pound, with GBP/USDup 0.20% at 1.5654.

The dollar was flat against the yen, with USD/JPY down 0.02% at 97.59, and down against the Swiss franc, with USD/CHF trading down 0.28% at 0.9239.

The yen slumped after official data revealed that Japan posted a larger-than-expected trade deficit of JPY1.024 trillion in July. Exports rose 12.2% on a year-over-year basis, boosted by a weaker yen, while imports climbed 19.6%.

Analysts were expecting a JPY786 billion trade gap, though the Japanese currency trimmed its earlier losses in directionless trading.

The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.02% at 1.0341, AUD/USD down 0.63% at 0.9124 and NZD/USD trading down 0.35% at 0.8077.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.11% at 81.26.

On Tuesday, the U.S. will see the release of the Chicago Fed National Activity Index.