Dollar broadly lower, Fed in focus

The dollar was lower against the other major currencies on Monday, following news that former U.S. Treasury Secretary Lawrence Summers bowed out of the race to become the next chairman of the Federal Reserve.

During U.S. morning trade, the dollar was down against the yen, withUSD/JPY shedding 0.52% to trade at 98.84.

The dollar weakened across the board after Summers’ withdrew from the running to succeed Ben Bernanke as the next Fed chairman. Summers’ was perceived as being likely to unwind economic stimulus measures more aggressively than his main rival for the post, Janet Yellen.

Investors were also awaiting the outcome of the upcoming Fed policy meeting, which concludes on Wednesday, amid doubts over whether the bank will start unwinding its USD85 billion-a-month bond buying program.

Data released on Monday showed that the Empire State manufacturing index fell to a four-month low of 6.29 in September from a reading of 8.24 in August. Analysts had expected the index to rise to 9.2.

This was offset by a report showing that U.S. industrial production rose 0.4% in August, in line with expectations after remaining flat in July.

Elsewhere, the euro was close to three-week highs against the dollar, with EUR/USD advancing 0.45% to 1.3356.

European Central Bank President Mario Draghi said Monday that the economic recovery in the euro zone remains “fragile” and reiterated that interest rates will remain at current or lower levels for an “extended period”. The comments came during a speech in Berlin.

Separately, data showed that consumer price inflation in the euro zone remained steady at 1.3% on a year-over-year basis in August, unchanged from an initial estimate and in line with expectations.

The pound advanced to eight-month highs against the dollar, withGBP/USD climbing 0.40% to 1.5941.

The dollar was also lower against the Swiss franc, with USD/CHF falling 0.48% to 0.9251.

Elsewhere, the greenback was sharply lower against its Australian, New Zealand and Canadian counterparts, with AUD/USD jumping 1.07% to 0.9344, NZD/USD gaining 0.60% to trade at 0.8182 and USD/CAD down 0.33% to 1.0320.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.47% to 81.29.