The dollar fell Monday against a group of six major currencies on expectations that central banks overseas will raise interest rates before the Federal Reserve does.
Traders expect the European Central Bank and Bank of England will raise rates as surging costs for food and oil drive prices higher. Rate hikes are a tool to fight inflation and also tend to support a currency. But higher rates can slow economic growth, and with the price of oil circling $100 a barrel, economists expect that the Fed will keep rates low to bolster the U.S. economy.
The dollar index, which compares the U.S. dollar against six other currencies, fell to 76.92, its lowest point since early November.
The euro rose to $1.3800 late Monday from $1.3741 Friday, while the pound gained to $1.6267 from $1.6098. The dollar edged up to 81.77 Japanese yen from 81.71 yen.
A speech by a Fed official Monday underscored the view of the U.S. central bank as less anxious about inflation risks in the U.S. economy. William C. Dudley, the vice chairman of the Fed's rate-setting committee, said in a speech in New York that the Fed was "still very far away" from helping the U.S. economy reach a normal level of employment and price stability, and that "faster progress toward these objectives ... need not require an early change in the stance of monetary policy." Reacting to the recent global jump in food and energy costs, he said that it would be "unwise" for the Fed to "overreact" to the recent rise in commodity prices.
A report from the government Monday showed that price pressures remain tame in the broader economy. The Commerce Department said consumers increased spending by just 0.2 percent last month despite a 1 percent gain in personal incomes _ the largest income gain in nearly two years.
Another measure in that report showed that a key measure of inflation trends, an index of prices paid by consumers excluding food and energy, rose a meager 0.1 percent in January.
In other trading Monday, the dollar fell to its lowest point against the Canadian dollar since February 2008. Canada is a major exporter of raw materials, and its dollar's value has soared alongside the price of oil and other commodities.
The dollar was worth 97.14 Canadian cents late Monday, down from 97.83 Canadian cents Friday, but edged up to 0.9289 Swiss francs from 0.9287 Swiss francs. The dollar is circling near record lows versus the Swiss franc, considered by investors a safe-haven currency as commodity prices rise because of political upheaval in the Middle East and North Africa.