The dollar held steady in cautious trade on Monday and pinned the yen near 150 as traders looked to a policy decision by the Bank of Japan later in the week, alongside other major central bank meetings and a slew of economic data releases globally.
The BOJ kicks off its two-day monetary policy meeting on Monday, leading a week which will also see interest rate decisions from the U.S. Federal Reserve and the Bank of England.
A PMI data deluge, inflation figures in the euro zone and U.S. nonfarm payrolls also add to the mix of the event-packed week.
"It's definitely a busy week," said Carol Kong, a currency strategist at Commonwealth Bank of Australia.
"The BOJ meeting will be the most interesting one (given) heightened speculation over a policy tweak at this meeting."
The yen JPY=EBS was little changed at 149.58 per dollar, getting a slight reprieve after having struck a one-year trough of 150.78 per dollar last week.
A recent surge in global interest rates has heightened pressure on the BOJ to change its bond yield control, as speculation mounts that the dovish central bank could hike its existing yield cap at this week's meeting.
"Our base case remains that the BOJ will leave its monetary policy settings unchanged, although we acknowledge that there is a risk that they will announce tweaks to its yield curve control programme," said Kong.
In the broader market, currency moves were largely subdued as traders stayed on guard and risk sentiment remained fragile.
The Australian and New Zealand dollars nudged higher after having slid to fresh 2023 lows last week, with the Aussie AUD=D3 last up 0.32% at $0.63545.
The kiwi NZD=D3 gained 0.28% to $0.5825. Palestinians in northern Gaza reported fierce air and artillery strikes early on Monday as Israeli troops backed by tanks pressed into the enclave with a ground assault that prompted more international calls for civilians to be protected.
"The geopolitical backdrop in the Middle East remains a dominant market consideration," said Chris Weston, head of research at Pepperstone.
U.S. RATES Against the dollar, sterling GBP=D3 fell 0.02% to $1.21195, while the euro EUR=EBS slipped 0.02% to $1.0563.
The dollar index =USD steadied at 106.57, as investors assessed what the recent run of resilient U.S. economic data would mean for the Fed's rate outlook.
Data on Friday showed U.S. consumer spending surged in September as households boosted purchases of motor vehicles and travelled, keeping spending on a higher growth path heading into the fourth quarter.
While expectations are for the Fed to leave interest rates on hold when it announces its policy decision later in the week, markets are pricing in a roughly 19% chance of a hike in December, according to the CME FedWatch tool.
"While the Fed will certainly not provide forward guidance in the classical sense at the upcoming meeting, it has already provided some helpful information on its interpretation of recent developments: a more balanced view of risks," said Christian Scherrmann, U.S. economist at DWS.
"The question is how the decision to hold rates will be communicated this time, especially as the Fed is not yet in a position to declare victory on inflation."
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