The dollar was lower against the yen in Asian trade Monday, with profit-taking pulling down the greenback amid a wait-and-see mood ahead of crucial events such as the Federal Open Market Committee and the Bank of Japan policy meeting later this week. The dollar USDJPY, -0.34% weakened to ¥107.96 from ¥108.16 late Friday in New York. Meanwhile, the euro EURUSD, +0.12% was at $1.2703 from $1.2672. The common currency EURJPY, -0.25% was at ¥137.15, compared with ¥137.02. The release of Europe's financial health tests didn't weight heavily on the market. According to the European Central Bank and the European Banking Authority, 25 banks technically failed the so-called stress tests, but most have already taken steps to solve their problems. However, some investors moved to take profits ahead of big events such as the FOMC slated between Tuesday and Wednesday, the BOJ meeting Friday and the U.S. gross domestic product data on Thursday. The dollar failed to regain much of its earlier losses, given the Japanese stock market's moderate pace of gains. The Nikkei Stock Index rose a mild 0.8% to ¥15,405.66 midday. "Investors will likely sit on sidelines ahead of a slew of incentives" that have the potential to move the market, said Koji Fukaya, chief executive of FPG Securities. With no fresh cues helping drive the dollar to test the upper half of ¥108 or ¥109, the dollar may remain trapped around ¥108 for now, said Mr. Fukaya. "The probability that the Federal Reserve will turn to a hawkish stance is low," at the conclusion of its two-day meeting, said Junichi Ishikawa, market analyst at IG Securities. Considering dovish comments from the Fed officials recently, the Fed will likely retain its guidance that short-term interest rates will remain near zero for a "considerable time," said Mr. Ishikawa. The Fed will also very likely put more emphasis on its stance to stay data-dependent when making a decision to raise rates. By doing so, the central bank may be able to bring early rate hike expectations under control. Mr. Ishikawa expects the dollar to remain firm against the yen anyway, even in such a scenario. Although it would likely cause an adjustment of dollar long positions, keeping a lid on the greenback's upward momentum. But the stock market's positive reaction to such a Fed decision could lead to yen selling against the dollar, said Mr. Ishikawa. The WSJ Dollar Index BUXX, -0.13% a measure of the dollar against a basket of major currencies, was down 0.18% at 77.52. Source: MarketWatch
