LONDON: The dollar edged up against the yen on Monday, though stayed well within recent ranges, as investors awaited Federal Reserve Chair Janet Yellen's congressional testimony for cues on the outlook for US monetary policy.
US Treasury yields have fallen and Fed Funds futures indicate investors are pushing back policy tightening expectations after Fed minutes indicated the central bank is not in a hurry to raise rates. So, a lot will depend on what Yellen says, especially on the back of an improvement in US data in the second quarter.
In the euro zone, European Central Bank President Mario Draghi addresses a European Parliament committee in Strasbourg and the single currency's recent strength against the dollar could be mentioned. ECB policymakers have in the past said that the exchange rate's strength worsens the disinflationary situation in the euro zone.
The euro was up 0.2 percent at $1.3635, lifted by talk of buying by long-term investors in London trade, while the dollar was up 0.1 percent against the yen at 101.50. The euro rose 0.3 percent against the yen to 138.36 yen, recovering from last week's five-month low of 137.50 yen.
"Investors are hoping for Yellen to say something substantial. The Fed, it seems, will tolerate a bit more inflation before it will tighten rates," Commerzbank currency strategist Peter Kinsella said.
"The key is US yields and if they are not moving higher, it's unlikely to translate into anything substantial for the dollar," he said.
Investors are also awaiting a policy review by the Bank of Japan on Tuesday, though it is widely expected to maintain its policy and its broader economic outlook.
The BOJ may trim its economic growth forecast for the current year, sources familiar with its thinking said, reflecting soft exports and a bigger-than-expected slump in household spending after a sales tax hike in April, though the change would not tip any policy changes to come.
"There hasn't been significant structural change that requires measures from them," State Street Global Markets' head of foreign exchange Bart Wakabayashi said.
"I'm surprised dollar-yen is as bid as it is," he said, referring to what he said was a lack trading incentives.
Demand for the safe-haven yen faded on Friday as concerns eased about the health of Portugal's largest bank and its impact on the euro zone financial system.
Speculators increased their bullish bets on the US dollar in the latest week, with the value of the dollar's net long position rising to $10.34 billion in the week through July 8, according to the data from the Commodity Futures Trading Commission released on Friday.
Meanwhile, the Australian dollar stabilised, after having fallen late on Friday as the country's central bank chief again said the currency was too strong.
In an interview with the Weekend Australian published late last week, Governor Glenn Stevens reiterated that some investors may be underestimating the risk of "a material decline" in the currency at some point.
The Aussie last traded at $0.9398, having dipped as low as $0.9370. Traders said a slew of Chinese economic data on Wednesday could have a bearing on the Australian dollar, given the Asian powerhouse is Australia's largest trading partner.
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