By Chris Dieterich Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--The dollar rose against the yen and euro Monday in subdued trading ahead of Tuesday's closely watched meetings of U.S. and Japanese central bankers.
The greenback's losses after Friday's disappointing nonfarm payrolls report have receded as investors appear cautious to stake positions ahead of the rate-setting meetings.
The dollar could fall if the Federal Reserve signals new measures designed to stimulate the flagging U.S. economic recovery, said analysts. Investors also will watch for revisions by the Fed to the outlook for U.S. economic growth.
"I think the focus really is on any indication about return to [quantitative easing]," said Mike Moran, senior foreign exchange strategist at Standard Chartered Bank in New York. "If there is any indication that they have their finger on the trigger, that could weigh on the dollar."
Monday morning, the euro was at $1.3250 from $1.3294 late Friday, according to EBS via CQG. The dollar was at Y85.70 from Y85.40. The euro was at Y113.46 from Y113.48. The U.K. pound was at $1.5961 from $1.5968. The dollar was at CHF1.0450 from CHF1.0377.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 80.558 from 80.317.
Most currency market observers do not expect the Fed on Tuesday to outline specific changes in policy, or to adjust the central bank's ultralow key rates. Instead, the focus will be on whether language of the Fed's statement points to a shift in policy.
Moran said it was not likely the Fed would announce a major shift in policy.
"The data on the economy has been weak but not disastrous," Moran said. Further softness in economic data reports is necessary "before that narrative goes to the next step of actual implementation."
Currency markets will also watch the Bank of Japan Tuesday for signals that it might take steps to curb recent gains by the yen as the dollar dips toward the Y85 level.
Japan's Ministry of Finance reported Monday that China bought up $5.3 billion worth of yen in June, and that on the year China bought nearly five times as much yen as in the previous five years combined, moves that will buoy the strength of the yen, an albatross on the neck of Japanese exporters.
"A break below Y84 on the back of [dollar] weakness and China buying is within reach," according to analysts at BNP Paribas in London.
-By Chris Dieterich, Dow Jones Newswires; 212-416-3417;
