NEW YORK (Reuters) - The U.S. dollar slipped against the yen on Monday as traders took profits from the greenback’s recent rally against the Japanese currency, while the dollar weakened against other major currencies on expectations for a dovish Federal Reserve meeting.
The dollar hit a session low of 110.85 yen after reaching a more than three-week high of 111.90 yen JPY=. Analysts said traders were taking profits and selling the dollar despite expectations that the Bank of Japan could increase its stimulus measures on Thursday after a policy meeting.
While the BOJ could increase stimulus, analysts said skepticism that such an increase could weaken the yen lifted the Japanese currency against the dollar, while the prospect of a Fed that would be in no rush to raise interest rates also weighed on the greenback.
“There are a huge amount of doubters that the BOJ could do anything policy-wise that would reflate the economy, and that the Fed would actually act any time soon,” said Boris Schlossberg, managing director at BK Asset Management in New York.
While the dollar hit 111.90 yen early on Monday, the majority of the greenback’s recent climb against the yen came on Friday, when the dollar rallied more than 2 percent against the yen. That rally was triggered by a Bloomberg report that the BOJ is considering applying negative rates to its lending program for financial institutions.
Despite recent gains, the dollar was last down 7.6 percent against the yen for the year, building on a 6.4 percent loss against the yen in the first quarter, which was the biggest quarterly decline since the third quarter of 2009.
The euro EUR= rebounded against the dollar, hitting a session high of $1.1277 after hitting a nearly four-week low of $1.1213 earlier on Monday. Analysts said expectations that the Fed would not suggest another interest rate hike soon in a policy statement on Wednesday hurt the dollar against the euro.
“There will be little guidance, and it all points to the Fed taking a more patient stance until the U.S. economy forces a rate hike,” said Alfonso Esparza, senior currency strategist at Oanda in Toronto, in reference to the central bank’s path of raising interest rates further.
The euro was last up 0.3 percent against the dollar at $1.1264. The dollar index, which measures the greenback against a basket of six major currencies, was last down 0.33 percent at 94.798 .DXY.
The dollar was last down 0.28 percent against the Swiss franc at 0.9750 franc CHF=.
Reporting by Sam Forgione; Additional reporting by Patrick Graham in London; Editing by Chizu Nomiyama and Meredith Mazzilli