"There has been a tremendous movement in the oil price and that's pretty much the major story. The personal income and spending numbers were much stronger than expected, as well as the factory orders," said Andrew Busch, global foreign exchange strategist at BM0 Capital in Chicago.
"These will go into the computation of the second quarter GDP number," Busch said. "I am expecting that number to be revised up from 1.9 to somewhere in the territory of 2.5 percent due to these numbers."
Data last week showed that the U.S. economy expanded at an annual rate of 1.9 percent in the second quarter, up from 0.9 percent in the first three months of 2008.
The dollar touched a session peak of 108.29 yen as U.S. light crude oil fell as low as $119.50, the lowest level since early May, arresting a sharp decline in U.S. stocks.
In late New York trade, the dollar was last up 0.5 percent at 108.24 yen.
Those gains saw the ICE Futures U.S. dollar index, which tracks the dollar's performance against a basket of six currencies, rise as high as 73.535.
Neutral Fed Statement Expected
Government data showed stronger-than-expected consumer spending and personal income in June, as well as an unexpected surge in consumer prices.
That raised prospects of higher U.S. interest rates by the end of the year. But analysts generally expect the Fed to leave its benchmark overnight lending rate steady at 2 percent on Tuesday and deliver a neutral statement on future policy.
A separate report showed new orders at U.S. factories increased more than expected in June.
"We are going to see continued emphasis on the fragility of the financial markets," said Omer Esiner, currency strategist at Ruesch International in Washington.
"That will be balanced by a hawkish position with regard to inflation, but nothing above and beyond what we have already heard. I expect the Fed to sound a pretty neutral statement with regard to the outlook for monetary policy."
The euro was up 0.1 percent at $1.5584 in late New York trade after trading as high as $1.5631.
Analysts said euro/dollar would stick to narrow trading ranges before the Fed's decision on Tuesday and the European Central Bank meeting on Thursday.
While the U.S. central bank is expected to stress its continuing worry about inflation combined with a slowing economy, ECB President Jean-Claude Trichet's statement may focus on his rate-raisingbias. In July, the ECB raised rates by 25basis points to 4.25 percent.
Traders will also await rate decisions from the Bank of England and the Reserve Bank of Australia this week.
The Aussie dollar was flat at US$0.9294 ahead of Tuesday's interest rate verdict by the Australian central bank. That bank's benchmark rate is 7.25 percent, and any cut would mark the country's first monetary loosening in seven years.