The U.S. dollar dropped against its most major counterparts in the New York session on Monday, as investors looked ahead to the release of key U.S. inflation reading this week for further clarity on the rate outlook.

The PCE price index, which is the Fed's preferred measure of inflation, is due on Friday.

The core PCE price index is expected to have climbed 0.3 percent month-on-month in February, keeping annual reading unchanged at 2.8 percent.

Traders are likely to keep an eye on reports on durable goods orders, consumer confidence and pending home sales due this week.

New home sales in the U.S. unexpectedly decreased in the month of February, according to a report released by the Commerce Department.

The Commerce Department said new home sales dipped by 0.3 percent to an annual rate of 662,000 in February after jumping by 1.7 percent to a revised rate of 664,000 in January.

Economists had expected new home sales to surge by 2.9 percent to a rate of 680,000 from the 661,000 originally reported for the previous month.

The greenback dropped to 1.0842 against the euro and 1.2652 against the pound, off its early highs of 1.0802 and 1.2587, respectively. The greenback is seen finding support around 1.11 against the euro and 1.31 against the pound.

The greenback eased against the franc and was trading at 0.8981. This may be compared to a previous 4-day low of 0.8964. If the currency falls further, it is likely to test support around the 0.87 region.

The greenback was trading at 0.6002 against the kiwi, down from an early more than 4-month high of 0.5986. The currency may locate support around the 0.62 level.

The greenback weakened to 0.6546 against the aussie and 1.3570 against loonie, from an early 6-day high of 0.6509 and a 3-1/2-month high of 1.3614, respectively. The greenback is poised to challenge support around 0.68 against the aussie and 1.33 against loonie.

In contrast, the greenback rebounded against the yen and was trading at 151.51. Immediate resistance for the currency is seen around the 154.00 level.

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