Currency markets remained subdued in today European session as traders took a cautious line ahead of this week Fed and Bank of Japan meetings and in the absence of major data releases. The dollar continued to slip against the yen, breaking below the key 102 level, while a rebound in oil prices boosted equities and commodity linked currencies.

The dollar index was down 0.4% in late European session at 95.70 as traders bet that the Fed will keep rates on hold at its policy meeting on Wednesday. Speculation that the BoJ will cut rates deeper into negative territory after it promised a comprehensive assessment of its policies at its September meeting failed to provide any support to the dollar against the yen. The greenback drifted lower in European trading, erasing all of Friday gains when it was boosted by stronger than expected inflation data. It hit a session low of 101.57 yen before rising slightly to 101.75 yen.

The euro and the pound staged a modest recovery, moving away from Friday lows. The single currency was unmoved by Eurozone current account data, which showed a smaller surplus in July compared to June. The euro edged up to 1.1188 dollars in late European trading.

Meanwhile, sterling rose to a high of 1.3090 against the dollar in a technical correction following Friday?s big slump when it fell on the back of strong US data and fresh Brexit worries. The pound later eased to trade around 1.3060 dollars.

Commodity currencies outperformed other majors on Monday, boosted by higher commodity prices and a weaker dollar. Crude oil rose sharply earlier in the day on reports that OPEC and non OPEC producers are getting closer to reaching a deal on stabilizing oil prices.

WTI and Brent crude were up over 2%, hitting highs of $44.13 and $46.85 a barrel respectively, having seesawed during the European session. This helped commodity currencies such as the Australian and New Zealand dollars to extend their gains to fresh intra-day highs in late European trading.

The aussie surged to a one-week high of 0.7572 against the US dollar, boosted by expectations that the Fed will not raise rates this week. Also lifting the aussie today was news that the RBA new governor, Philip Lowe, and Australia Treasurer have agreed to loosen the RBA inflation target. The new interpretation of the 2-3% inflation target allows for greater short-run variation in inflation, meaning that further rate cuts are less likely.

The New Zealand dollar was also up sharply, rising by 0.9% to 0.7321 versus the greenback. The kiwi is likely to stay in focus for the rest of the week ahead of tomorrow?s latest dairy auction and Thursday RBNZ meeting.

Gold rose only modestly on Monday, climbing to $1314.50 an ounce in late European trading as it attempted to claw back some of last weeks heavy losses.