The U.S. dollar traded higher against the most major currencies ahead of the Fed's monetary policy decision on Wednesday. Housing starts in the U.S. dropped 17.0% to 897,000 annualized rate in February from a 1.081 million pace in January, missing expectations for a decrease to 1.050 million. January's figure was revised up from 1.065 million units.
Building permits in the U.S. increased 3.0% to 1.092 million annualized rate in February from a 1.06 million pace in January. Analysts had expected building permits to climb to 1.07 million units.
The euro traded lower against the U.S. dollar. Germany's ZEW economic sentiment index increased to 54.8 in March from 53.0 in February, but missing expectations for a rise to 58.9. That was the highest reading since February 2014.
The increase was driven by lower oil prices and a weaker euro. Greek debt talks and the Ukraine conflict continue to weigh on sentiment.
Eurozone's ZEW economic sentiment index rose to 62.4 in March from 52.7 in February, beating expectations for a gain to 58.2.
Eurozone's consumer price index rose 0.6% in February, after a 1.6% decrease in January.
On a yearly basis, Eurozone's final consumer price inflation remained unchanged at 0.3% in February, in line with expectations.
Eurozone's consumer price inflation excluding food, energy, alcohol and tobacco rose to an annual rate of 0.7% in February from a previous estimate of 0.6%. Analysts had expected the index to remain unchanged at 0.6%.
The British pound traded lower against the U.S. dollar in the absence of any major economic reports from the U.K.
The Canadian dollar traded lower against the U.S. dollar. Canadian manufacturing shipments dropped 1.7% in January, missing forecasts of a 1.1% decrease, after a 1.6% increase in December. December's figure was revised down from a 1.7% rise.
The decline was driven by a drop in sales of petroleum and coal products.
The New Zealand dollar declined against the U.S. dollar. In the overnight trading session, the kiwi traded higher against the greenback in the absence of any major economic reports from New Zealand.
The Australian dollar traded lower against the U.S. dollar. In the overnight trading session, the Aussie traded slightly higher against the greenback after the release of the Reserve Bank of Australia's (RBA) monetary policy meeting minutes. The RBA is likely to cut its interest rate this year but it will wait for April's inflation and labour market data.
The RBA board discussed whether or not to lower its interest rate further at this meeting but "members saw benefit in allowing some time for the structure of interest rates and the economy to adjust to the earlier change".
The central bank pointed out that the Aussie "remained above most estimates of its fundamental value" despite the recent depreciation.
The Japanese yen traded higher against the U.S. dollar. In the overnight trading session, the yen traded higher against the greenback after the Bank of Japan's (BoJ) interest rate decision. The BoJ kept its monetary policy unchanged (interest rate: 0.00-0.10%, monetary base target: 275 trillion yen). The central bank will expand its monetary base at an annual pace of 80 trillion yen. This decision was expected by analysts.
The central bank voted 8-1 to keep its monetary policy unchanged. The BoJ said that Japan's economy has continued to recover moderately.
Japan's central bank downgraded its consumer inflation forecast to around zero per cent "for the time being" due to the decline in energy prices.
The BoJ Governor Haruhiko Kuroda said in a press conference on Tuesday that a decline in consumer prices is temporary as the consumer prices were driven by lower energy costs. He added that the consumer inflation could decline below zero.
Mr Kuroda expects that consumer prices will rise in the second half of the fiscal year that ends in March 2016. The central bank will adjust its monetary policy if needed, Mr Kuroda said.