Low resolution Hall-effect sensors have been commonly applied in PMSM drives for the reason of cost and volume. Generally, rotor speed and position are estimated inaccurately due to the installation error of the sensors. The inaccurate position degrades the performance of current control and also increases torque ripples, which aggravates mechanical vibration and noise. An improved dual observer is proposed in this paper to suppress the impact of misplaced Hall-effect sensors and improve estimation accuracy. By a cascading dual Luenberger observer and combining feedback decoupling control, the low-order noises produced by the deviation of Hall signals are effectively suppressed. The effectiveness of the proposed method is verified by experimental results.