* 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
(Adds comment, updates prices)
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.
The yen also gained around a third of a percent against the
dollar and the euro, helped by expectations that any policy
announcement by the Bank of Japan this week would stop short of
the sort of dramatic action needed to weaken its currency.
Expectations of a rise in U.S. rates this week have also
steadily evaporated, and had prodded the dollar lower before
Friday's stronger-than-expected inflation data.
"I think the general view is one of not expecting the BOJ to
announce any policy easing this week," said Lee Hardman,
currency economist with Bank of Tokyo-Mitsubishi UFJ in London.
"That supports our view that the yen should trade on a
stronger footing after the meeting. The lack of strong
expectations for a rise in U.S. rates obviously plays into that
The yen gained 0.4 percent against the dollar to 101.84
in Europe, after Asian trading thinned by a Japanese
The dollar index, which measures the U.S. currency's
value against a basket of six major currencies, fell 0.3 percent
to 95.846. Friday's rise was the dollar's biggest daily
gain since late June..
While expectations of a rise in rates by the Fed this week
are now at just 12 percent, 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 Bank of Japan is due to conduct a comprehensive review
of its own policy framework, which 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 negative interest rates on deposits.
Either way, faith in Tokyo's ability to weaken the yen has
been fading steadily, with bets on further gains still the
dominant positive position in major FX markets.
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 Catherine