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The greenback rose against the Japanese Yen on Monday as the crude oil price falls to a three-month low and some upbeat U.S. economic data generated optimism about the prospects of the broader economy, however, investors played cautiously and adjusted their positions ahead of Tuesday's Federal Reserve meeting to decide on U.S. interest rates saw the dollar ease against the euro.

Earlier in the day, the U.S. dollar weakened versus the euro after global stocks declined amid concern losses in U.S. credit markets may widen as HSBC Holdings Plc (Europe's biggest bank by market value), said first-half profit fell almost 30 percent on record subprime mortgage defaults in the U.S. However, the dollar pared its loss after release of better-than-expected U.S. factory orders in June (1.7% versus 0.7% forecast and 0.6% the previous month) and crude oil fell below $120 a barrel for the first time since May. At New York closing, crude oil delivery for September ended at $121.23 per barrel, down $3.87. The single currency rose to a session high of 1.5632 in U.S. morning but retreated sharply to 1.5565 on the upbeat U.S. economic data, trading at 1.5576 at New York closing. The cable also fell from its intra-day high of 1.9760 to as low as 1.9601 on greenback’s broad based strength before recovering, traded at 1.9622 at New York closing.

Against the Japanese Yen, the U.S. dollar touched a session peak at 108.29 and remained to trade above 108.00 level as the U.S. stock market once turned from negative to positive due to sharp decline in crude prices, however, the DJI still fall 42 points at closing, ended at 11,284 on Monday. The euro rose sharply to as much as 0.7 percent to 168.79 versus the Japanese Yen on renewed carry demand on ‘not so bad’ sentiment in financial market after Friday’s sharp fall to as low as 166.99.

Elsewhere, the Aussie dollar remained under pressure ahead of Tuesday's interest rate verdict by the Australian central bank. It did bounce after touching a three month’s low at 0.9285 to 0.9347 earlier but traded at 0.9290 at New York closing. The median forecast is that Central Bank will leave its benchmark rate is 7.25 percent. On the other side, the New Zealand dollar rebounded to a session high of 0.7335 versus the U.S. dollar before easing in late U.S. session. It touched 0.7246, the weakest since Sept. 19 last week.

On Tuesday, economic data release includes Australia RBA rate decision, German Service PMI, eurozone Service PMI and retail sales, U.K. industrial production, manufacturing and Service PMI, U.S. ISM non-manufacturing, and most importantly, the Fed rate decision. Generally, investors are expecting the Fed to leave its benchmark overnight lending rate steady at 2 percent and deliver a neutral statement on future policy.