(Recasts after start of European trading)
* Dollar index below last week's highs ahead of holidays
* Yen boosted by better-than-expected Japanese data
* BOJ seen holding steady at 2-day meeting starting Monday
* Graphic: World FX rates in 2016 tmsnrt.rs/2egbfVh
By Jemima Kelly
LONDON, Dec 19 The dollar dipped on Monday,
pulling away from 14-year highs hit last week on expectations of
a faster pace of U.S. monetary tightening, as investors booked
profits and lightened hefty bets on the currency into the end of
It had surged after a policy statement from the Federal
Reserve on Wednesday, threatening parity with the euro as
markets moved to price in the chance that rates will be hiked
three times in 2017.
But as a two-week period got under way in which many traders
will be away from their desks on holiday, meaning thin
liquidity, the euro edged up and the dollar index fell 0.3
percent to 102.65, almost 1 percent below Thursday's peak
"Nothing has fundamentally changed in terms of where clients
see the dollar in 2017, but this is about derisking," said
Citi's head of G10 currency strategy in London, Richard
"You basically just reduce what are your consensus and your
largest positions, which happen to be a long dollar, a short
yen, and a long dollar, a short euro."
Cochinos said a speech by Fed Chair Janet Yellen due at 1830
GMT would be watched for any hint that last week's Fed meeting
was interpreted by markets as more hawkish than had been
Against the yen, the dollar fell as much as 0.9 percent,
before recovering a touch to trade down half a percent on the
day by 0830 GMT at 117.35 yen. The yen was boosted by
data showing Japan's export performance improved strongly in
Dollar net long positions were little changed in the week
through Dec. 13, affirming a trend in place since the Nov. 8
election of Donald Trump as U.S. president on the expectation of
more inflationary infrastructure and fiscal spending, data
showed on Friday.
Net shorts on the yen, meanwhile, rose to their largest
since early December last year.
The Bank of Japan was scheduled to begin a two-day policy
meeting on Monday, at which it is expected to maintain its
10-year government bond yield target as the weaker yen helps
Japan's economic prospects, a Reuters poll showed on Friday.
"The speed of the yen's weakening was likely much faster
than the BOJ anticipated," said Ayako Sera, market economist at
Sumitomo Mitsui Trust Bank in Tokyo.
"While no major changes are expected from the meeting, some
tweaks to policy are possible, to adjust to the new market
situation," she said.
For Reuters new Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Additional reporting by Tokyo markets team; editing by John