The US dollar sagged against most major currencies ahead of the 2-day Federal Reserve meeting and Group of 20 summit this week.  Many investors are expecting the Fed to keep its ultra-loose monetary policy well into 2010, and at the G20 summit many are expecting leaders to discuss rebalancing the global economy, a process which will almost certainly require a weaker dollar.  At the G20 summit, Washington may urge G20 leaders to launch a new push where debtor nations like the US will find new measures to save more, while exports like China, Germany and Japan will spend more.   

The euro hit a one-year high above $1.48 overnight as the dollar came under pressure ahead of the Fed meeting and the G20 summit this week.  European Central Bank Governing Council member Axel Weber said the ECB has an obligation to raise interest rates once the Eurozone economy recovers and puts pressure on inflation and the recent moves in currency markets were not out of line.  On the economic data front, Italy's Q2 unemployment came in at 7.4%, better than the forecasted 7.7%.     
The British pound hit a new five-month low vs. the euro and recouped losses seen on Monday against the dollar.  Perceptions the Bank of England will not be easing up on loose-monetary policy is expected to keep downward pressure on the pound.  Markets will be keeping a close eye on the BoE minutes latest policy meeting due tomorrow. 
The Japanese yen strengthened against the dollar as negative sentiment pushed market players to sell the safe-haven currency into riskier assets.  The yen has been fairly quiet otherwise, with Japan's holiday extending until tomorrow.

The Canadian dollar rallied overnight as commodity and metal prices rose, but lost some steam after weaker than expected retail sales data.  As the greenback weakened, oil climbed above $70 a barrel and gold prices neared record high.  Data from Statistics Canada reported retail sales dropped 0.6% in the month, pushed lower by a drop in gasoline prices and a fall in sales in supermarkets and home electronic sales.      
The Australian and New Zealand dollars strengthened against the US dollar on higher commodity prices, and an increase in investor risk appetite.  As world stocks rallied, investors' sold off the greenback to purchase riskier assets such as the Aussie and the Kiwi.  However, much of the Aussie rally today comes from the Kiwi hitting a 13-month high against the US dollar.    

The Mexican peso firmed vs. the dollar ahead of the Fed meeting and had its biggest weekly gain in a month as Mexico's lawmakers may pass fiscal reforms as part of the government's 2010 budget.  President Felipe Calderon proposed tax-law changes that would bring in an additional 176 billion pesos ($13.3 billion) in revenues aimed to rein in a growing budget deficit.