The dollar fell from a two-week high on Monday, with a stronger oil price the chief theme in a market battening down the hatches ahead of central bank policy meetings in Japan and the United States.
Commodity-linked currencies including the Canadian, Australian and New Zealand dollars were all half a percent higher in early trade in Europe as crude rose 1.5 percent on the back of speculation about OPEC production controls.
The yen also gained around a third of a percent against the dollar and the euro, helped by expectations that any policy announcement by the Bank of Japan this week would stop short of the sort of dramatic action needed to weaken its currency.
Expectations of a rise in U.S. rates this week have also steadily evaporated, and had prodded the dollar lower before Friday’s stronger-than-expected inflation data.
“I think the general view is one of not expecting the BOJ to announce any policy easing this week,” said Lee Hardman, currency economist with Bank of Tokyo-Mitsubishi UFJ in London.
“That supports our view that the yen should trade on a stronger footing after the meeting. The lack of strong expectations for a rise in U.S. rates obviously plays into that as well.”
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