U.S. Dollar Depreciates Amid Falling Treasury Yields

The U.S. dollar slipped against its major counterparts during European deals on Monday, as treasury yields dropped after high-level talks between the U.S. and China failed to resolve outstanding issues between the two sides, with Beijing blaming Washington for the "stalemate" in relations.

A sell-off in European shares, fueled by China's crackdown on the tech sector, renewed demand for safe-haven treasury bonds.

China's Vice Foreign Minister Xie Feng accused the Biden administration for suppressing the country's development and urged Washington "to change its highly misguided mindset and dangerous policy."

Investors focus on the Federal Reserve's monetary policy meeting due this week for more hints about its plan to scale back the bond buying program.

Economists do not expect any change to the Fed funds target rate and quantitative easing programme when it ends its two-day meeting on Wednesday.

All eyes will be on the central bank's ongoing debate on tapering its $120 billion a month bond buying program.

Fed Chairman Jerome Powell acknowledged that current inflationary pressures could be transitory and stimulus measures will remain in place for some time.

U.S. new home sales for June are due out at 10 am ET.

The greenback slipped to a 10-day low of 1.3800 against the pound, 4-day lows of 1.1800 against the euro and 0.9166 against the franc, off its early highs of 1.3737, 1.1763 and 0.9202, respectively. The greenback is likely to face support around 1.41 against the pound, 1.21 against the euro and 0.90 against the franc.

The greenback pulled back from an early high of 110.58 against the yen and edged down to 110.12. Next key support for the greenback is likely seen around the 108.00 level.

The latest survey from Jibun Bank showed that the manufacturing sector in Japan continued to expand in July, albeit at a slower pace, with a manufacturing PMI score of 52.2.

That's down from 52.4, although it remains above the boom-or-but line of 50 that separates expansion from contraction.

The greenback weakened to a 4-day low of 1.2545 against the loonie, from a high of 1.2591 seen at 4:15 am ET. On the downside, support is seen near the 1.22 level.

In contrast, the greenback held steady against the aussie and the kiwi, after rising to a 5-day high of 0.7331 and a 4-day high of 0.6948, respectively in previous deals. The greenback had ended last week's trading at 0.7362 against the aussie and 0.6975 against the kiwi.

U.S. new home sales for June will be published in the New York session.