The dollar index, which tracks the movements of the dollar against the euro, the yen, the pound and three other currencies, was almost flat today at 96.555, hitting a two-week low of 96.376 earlier in the day.
The dollar has weakened in recent days as investors expect the Federal Reserve to take a dovish stance at this week's meeting.
Market participants expect the Fed to keep its target overnight interest rate unchanged and maintain its commitment to "patience" in monetary policy adjustments. Weak manufacturing data released by the United States on Friday helped to consolidate that expectation.
"The Federal Reserve will be a major theme this week, and the market is looking forward to strengthening their dove stance and continuing to consolidate their view that they will support the market." Brad Bechtel, head of global foreign exchange operations at Jefferies, said in a report.
Analysts say traders will focus on whether policy makers have adequately cut their interest rate expectations to make their personal interest rate views more consistent with their patience commitments over the next three years.
Investors will also pay close attention to details of the Fed's plan to stop holding nearly $3.8 trillion in bonds.
"As the Fed is expected to lower its forecast for future interest rate hikes, investors should expect this to boost interest in risky assets later this week," Dean Popplewell, vice president of market analysis at Oanda, a foreign exchange trading company, said in a report.
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