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Dollar steady in subdued market as key events loom

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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 U.S. monetary policy.

U.S. 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. Much will depend on what Yellen says, especially on the back of an improvement in U.S. 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 dis-inflationary situation in the euro zone.

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The euro was up 0.2 percent above $1.36, lifted by talk of buying by long-term investors in London trade, while the dollar was up 0.1 percent against the yen under 102. 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 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.

Meanwhile, the Australian dollar stabilized, 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.

--By Reuters. For more information on currencies, please click here.

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