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 The euro edged up 0.1 percent to $1.1350, holding on to last week's
1.8 percent gain. The dollar eased 0.1 percent to 120.42 yen.
Against a basket of six major currencies, the dollar eased 0.1
percent to 95.067.
Even the disappointing set of Chinese data released on Sunday failed
to stir the market. Growth in China's investment and factory output
missed forecasts in August, raising the risk that economic growth
may slow below 7 percent in the third quarter for the first time
since the global financial crisis.
"Softer Chinese industrial production and fixed asset investment
data at the weekend should keep a lid on AUD and NZD, but markets
are looking forward – to the Fed," analysts at ANZ wrote in a note
to clients.
The Fed holds its two-day meeting on Sept. 16 to Sept. 17 and
markets are still guessing whether the central bank will hike rates
then, or opt for December or early next year.
"It is fair to say that the full spectrum of views is on offer.
Clearly this is the most anticipated Fed meeting in a number of
years," ANZ analysts added.
Currency speculators in the week ended Sept. 8 raised bullish bets
on the greenback for the first time in about a month, latest figures
showed, suggesting perhaps that some in the market are betting on
some action.
What the Fed says about the outlook for interest rates will be key
for determining the dollar's trend, said Masashi Murata, currency
strategist for Brown Brothers Harriman in Tokyo.
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"More than the question of whether they will or they won't (raise
interest rates this week), I think the focus is the statement and
Yellen's news conference," he said.
This week's Fed meeting will be accompanied by the release of Fed
policymakers' latest summary of economic projections and a news
conference by Fed Chair Janet Yellen.
For example, even if there were to be a rate hike this week, the
dollar could come under pressure if Fed policymakers downgrade their
views on the appropriate path for interest rates in 2016 in their
so-called "dot chart", Murata added.
Ahead of the Fed, the Bank of Japan (BOJ) will hold its own policy
meeting on Sept. 14 to Sept. 15, with the outcome due on Tuesday.
While there is some talk that the BOJ may expand its already massive
monetary stimulus, sources familiar with their thinking told Reuters
that there is no mood to take such action this week.
(Editing by Richard Pullin and Eric Meijer)
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