Forex - Dollar firms on U.S. industrial output data, eyes Fed meeting

The dollar rose against most major currencies on Monday after industrial production data beat expectations though gains were limited as investors remained camped on the sidelines to await the Federal Reserve's decision on monetary policy on Wednesday.

In U.S. trading on Monday, EUR/USD was up 0.01% at 1.3807.

The Federal Reserve reported on Monday that U.S. industrial production rose by a 0.6% last month, above expectations for a 0.4% rise and the fastest increase in seven months. 

The news gave the dollar some support, though investors remained cautious ahead of the Fed's upcoming two-day policy meeting that opens on Tuesday.

A string of disappointing economic reports has cemented expectations that the central bank will maintain the current pace of its USD85 billion in monthly asset purchases into early next year.

Asset purchases aim to spur recovery by driving down long-term borrowing costs, weakening the dollar in the process.

Still, the upbeat industrial output number gave investors some hope that sooner or later, the Fed will begin to taper the pace of its stimulus program, which would give the dollar support afterwards. 

Elsewhere, industry data revealed that U.S. pending home sales fell 5.6% last month, down for the fourth consecutive month and well below market calls for a gain of 0.1%, which capped the dollar's advance somewhat.

The greenback was up against the pound, with GBP/USD down 0.03% at 1.6162.

In the U.K., Bank of England policymaker David Miles said Monday that raising interest rates before there was a “meaningful” reduction in the unemployment rate would be "pretty catastrophic," which softened the pound.

Elsewhere, the pair shrugged off a Confederation of British Industry report that found just 2% of retailers reported an increase in sales in October, down from 34% in September. 

The dollar was up against the yen, with USD/JPY up 0.24% at 97.64, and up against the Swiss franc, with USD/CHF up 0.18% at 0.8942.

The dollar was mixed against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.12% at 1.0439, AUD/USD down 0.02% at 0.9582 and NZD/USD trading up 0.31% at 0.8304.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.04% at 79.29.
On Tuesday, the U.S. is to produce data on retail sales as well as its producer price index and a report on consumer confidence.