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The dollar ebbed on Monday on renewed expectations of a rate cut by the Federal Reserve in March, while the yuan fell to a one-month low after China's central bank surprised markets by keeping its medium-term policy rate steady.

The People's Bank of China (PBOC) on Monday left the interest rate unchanged when rolling over maturing medium-term policy loans, defying market expectations for a cut to shore up China's bumpy post-pandemic economic recovery.

That sent the onshore yuan sliding to a one-month low of 7.1813 per dollar, while its offshore counterpart was last at 7.1863 per dollar, languishing near Friday's one-month trough.

China's fourth-quarter gross domestic product (GDP), December industrial production, retail sales and unemployment rate are among the key economic indicators out on Wednesday, which are likely to provide further clarity on the outlook for the world's second-largest economy.

In the broader market, traders also have their eye on a reading on UK inflation due later in the week, as the market focus remains on how soon major central banks globally could begin easing rates this year.

Sterling slipped 0.1% to $1.2739, though remained not too far from its two-week peak hit last week.

The euro hovered near the $1.10 mark and was last 0.05% higher at $1.0957. The dollar index dipped 0.1% to 102.40, having drifted largely sideways over the past couple of sessions.

Bets for a Fed cut in March have gathered some steam after data on Friday showed U.S. producer prices unexpectedly fell in December, sending U.S. Treasury yields sliding in response. [US/]

"We move past the US CPI and PPI releases and the market has become even more convinced that the Fed's easing cycle starts in March, with a 25bp cut priced for every meeting from this starting point," said Chris Weston, head of research at Pepperstone.

Market pricing now points to a 78% chance that the U.S. central bank will begin easing rates in March, as compared to a 68% chance a week ago, according to the CME FedWatch tool.

In Asia, the yen remained under pressure at 145.06 per dollar on expectations that the Bank of Japan is likely to keep its ultra-loose policy settings unchanged at its upcoming policy meeting next week.

The Australian dollar, often used as a liquid proxy for the yuan, edged 0.13% higher to $0.6695. The New Zealand dollar slipped 0.11% to $0.6234.

"I expect (Wednesday's) data dump to show weak momentum in the Chinese economy," said Carol Kong, a currency strategist at Commonwealth Bank of Australia.

"That could be a headwind for... risk currencies like the Aussie and kiwi."

Elsewhere, the Taiwan dollar fell to a more than three-week low of 31.222 per U.S. dollar, after the Democratic Progressive Party's (DPP) Lai Ching-te won the presidency over the weekend, though his party lost its majority in parliament

Analysts expect Taiwan's stock market to take a hit this week as the spectre of policy paralysis fuels selling in a market that is up 25% in little more than a year.

"On net, we do not expect large post-election market moves, given the outcomes were broadly in line with polls, no major changes in economic policy, and likely limited impact on cross-strait trade," said analysts at Goldman Sachs, who are neutral on the Taiwan dollar.