The dollar is losing ground against all of its major rivals Monday afternoon. Traders are in a cautious mood ahead of the Federal Reserve's highly anticipated monetary policy announcement scheduled for Wednesday.

The Fed is widely expected to raise interest rates by another quarter point, although traders are likely to closely scrutinize the central bank's accompanying statement and forecasts for clues about future rate hikes.

Business activity in the New York manufacturing sector saw substantially slower growth in the month of December, according to a report released by the Federal Reserve Bank of New York on Monday. The New York Fed said its general business conditions index plunged to 10.9 in December after rising to 23.3 in November.

While a positive reading still indicates growth in regional manufacturing activity, economists had expected the index to dip to 20.0.

After reporting a sharp pullback in U.S. homebuilder confidence in the previous month, the National Association of Home Builders released a report on Monday unexpectedly showing a continued deterioration in confidence in the month of December.

The report said the NAHB/Wells Fargo Housing Market Index dropped to 56 in December after tumbling to 60 in November. Economists had expected the index to inch up to 61.

The dollar has dropped to around $1.1350 against the Euro Monday afternoon, from an early high of $1.1299.

Eurozone consumer price inflation in November eased more than initially estimated, latest data from Eurostat showed on Monday. The consumer price index rose 1.9 percent year-on-year, which was slower than the 2 percent flash estimate on November 30. The figure is the lowest since May, when it was at the same level.

The buck has fallen to around $1.2625 against the pound sterling this afternoon, from a high of $1.2552 this morning.

UK households' assessment of their future financial wellbeing fell to its lowest level in six months in December, amid a stronger increase in living costs and a weaker rise in employee earnings, survey data from the IHS Markit and Ipsos MORI showed on Monday.

The IHS Markit Household Finance Index, or HFI, fell to 43.9 from 44.4 in November, marking the lowest reading since June.

The greenback has dropped to nearly a 1-week low of Y112.725 against the Japanese Yen Monday afternoon, from an early high of Y113.520.

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