* Dollar index pulls back from Friday's high
* Pares gains made after strong U.S. CPI data
* Oil gains push commodities currencies higher
* Focus on BOJ, Fed meetings on Sept 20-21
(New throughout )
By Patrick Graham
LONDON, Sept 19 The dollar fell from a two-week
high on Monday, with a stronger oil price the chief theme in a
market battening down the hatches ahead of central bank policy
meetings in Japan and the United States.
Commodity-linked currencies including the Canadian,
Australian and New Zealand dollars were all half a percent
higher in early trade in Europe as crude rose 1.5 percent on the
back of speculation about OPEC production controls.
Moves in the euro, yen and dollar were limited, with
investors eyeing the chances of a shift in the Bank of Japan's
policy toolkit and a U.S. Federal Reserve statement that points
more clearly to a rise in interest rates this year.
Expectations of a rise in U.S. rates this week have steadily
evaporated, prodding the dollar lower until Friday's
stronger-than-expected inflation data. But there is speculation
that officials will start the ball rolling for a December move.
"We believe there is very little downside risk left to the
dollar from here," said Manuel Oliveri, a strategist at Credit
Agricole in London.
"Today looks a bit corrective. It doesn't make much sense to
expect this to continue on the back of all the risk events
coming up this week."
The dollar index, which measures its value against a
basket of six major currencies, fell 0.2 percent to 95.888
. Friday's rise was the dollar's biggest daily gain since
late June. The euro was flat at $1.1159.
U.S. short-term interest rate futures imply a 55 percent
chance of the Fed raising interest rates by December, compared
to around 47 percent before the inflation data, according to CME
Group's FedWatch Tool.
The Bank of Japan is due to conduct a comprehensive review
of its current policy framework that combines negative interest
rates with a massive asset-buying programme.
Speculation is rife it will change tack in favour of a
policy mix that ups stimulus while also protecting banks from
the problems generated by putting negative interest rates on
Either way, faith in Tokyo's ability to weaken the yen has
been fading steadily, with bets on further gains by the yen
still the dominant positive position in major FX markets.
The yen gained 0.2 percent against the dollar to 102.075
in trading thinned by a Japanese holiday.
Satoshi Okagawa, senior global markets analyst for Sumitomo
Mitsui Banking Corporation in Singapore, said that unless the
BOJ surprises by adopting some form of radical policy easing,
the yen will probably strengthen.
"Unless they were to say that they will buy foreign bonds or
something like that, the yen will probably rise," he said.
(Additional reporting by Masayuki Kitano; editing by John