The greenback rebounded briefly against most of its major counterparts and then weakened again on renewed risk appetites as U.S. stocks pared most of early losses after the release of U.S. leading indicators, which came out at 0.6% in August and posted a fifth consecutive month gain (although lower than forecast figure of 0.7%).

Trading is relatively thin ahead of this week's FOMC meeting. Investors are focusing on the fiscal stimulus plan of the U.S. which may be removed before those in Japan, leading the way for a Fed interest rate hike sometime in 2010.

With no major economic data out, the single currency remained weak in Asian and European session due to short covering in dollar and decline in regional equity markets. Price fell to as low as 1.4611 ahead of U.S. opening and then rebounded from there as the Dow pared some of its early loses (DJI fell 41 points to end at 9778 despite the –95 points opening) and price once crawled back to 1.47 level before retreating.

The British pound fell to as low as 1.6134 versus the dollar and a 5-month low of 0.9079 against the euro in European morning after BOE released its quarterly bulletin where part of it indicated that 'sterling's long-run sustainable exchange rate may have fallen due to an increased focus on Britain's economic imbalances in the wake of credit crisis'. However, trading volume was thin and price stabilised in U.S. session in line with the rebound in equities.

The Fed will hold its two-day meeting on Tuesday and is widely expected to keep its target rate for overnight loans at a range of zero to 0.25 percent. Chairman Ben Bernanke and colleagues may talk more in the meeting on how to wind down purchases of mortgage-backed securities.

Economic data to be released on Tuesday include:

Current account in New Zealand; trade balance in Switzerland; retail sales in Canada and U.S. home price.