The U.S. dollar fell from Friday's more than two-week high against a basket of major currencies on Monday on expectations that any Bank of Japan action this week would not weaken the yen and the Federal Reserve would refrain from raising rates.
The BOJ is due to conduct a comprehensive review of its policy framework, which combines negative interest rates with a massive asset-buying program. The BOJ and Fed meet on Sept. 20-21.
Speculation is rife that the BOJ will change tack in favor of a policy mix that ups stimulus while also protecting banks from the problems generated by negative interest rates on deposits.
A growing belief that the BOJ will stop short of the dramatic action needed to weaken its currency, however, sent the dollar to a six-day low against the yen of 101.59 yen. The dollar was last down 0.53 percent against the yen at 101.75 yen.
"There is a certain amount of skepticism going into this meeting that the BOJ has run out of tools," said Richard Franulovich, senior currency strategist at Westpac Banking Corporation in New York.
Doubts that the BOJ is capable of weakening the yen have grown since the BOJ shocked markets in January by cutting rates below zero for the first time, which only weakened the currency temporarily. The yen has since gained more than 16 percent against the dollar.
Expectations that the Fed would not raise interest rates this week also weakened the dollar. Traders saw just a 15 percent chance of a rate hike this Wednesday, according to CME Group's FedWatch program.
While that probability was up slightly from 12 percent on Friday, expectations are far higher for a rate hike in December, at more than 56 percent.
"The market is resigned to believe that (the Fed is) not going to raise rates this week," said Thierry Albert Wizman, global interest rates and currencies strategist at Macquarie Ltd in New York.
The dollar index, which measures the greenback against a basket of six major currencies, was last down 0.38 percent at 95.744 after hitting a 15-day high of 96.108 on Friday. The euro was last up 0.17 percent against the dollar at $1.1173.
Commodity-linked currencies such as the Australian, New Zealand and Canadian dollars rallied on gains in oil prices. The Aussie was last up about 1 percent against the dollar at a six-day high of $0.7568.