The yen strengthened against the dollar on Monday as signs the Bank of Japan will exit negative interest rates at its policy meeting next week contrasted with expectations for the Federal Reserve to cut rates in June.

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The dollar index, which measures the currency against the yen and five other major rivals, stuck close to a nearly two-month low reached Friday, when monthly payrolls figures signalled a cooling US labour market, keeping the Fed on track to ease policy.

Sterling pulled back sharply from a multi-month high, following its best week since November of 2022, amid bets the Bank of England will be slower to cut rates than the Fed or European Central Bank.

The greenback eased 0.17 per cent to 146.82 yen, heading back toward the five-week low of 146.48 reached on Friday. The dollar index was flat at 102.68, hovering not far from Friday's low of 102.33, a level not seen since Jan. 15.

Dollar-yen "should remain heavy this week, with bounces into 148 likely to attract sales as expectations continue building that the BOJ might tweak policy (on) 19th March," Westpac strategists wrote in a note to clients.

Meanwhile, the dollar index "looks vulnerable to a deeper setback," and could test support at 101 this week, the note said. A growing number of BOJ policymakers are warming to the idea of ending negative rates at their March 18-19 gathering, sources told Reuters, amid expectations for hefty pay rises from Japan's biggest firms when results of this year's annual "shunto" wage negotiations are due on Wednesday.

Elsewhere, Jiji news agency reported the BOJ is considering a new quantitative monetary policy framework to replace the current yield curve controls. By contrast, traders lay odds at 73 per cent for the Fed to cut rates by the conclusion of its June 11-12 meeting, according to the CME Group's FedWatch Tool, as softness in Friday's jobs data reinforced Fed Chair Jerome Powell's comments earlier in the week that policymakers were "not far" from having the confidence needed to cut rates. The next Fed meeting runs March 19-20.

Sterling slumped 0.7 per cent to $1.2859, but after closing out Friday with a more than 1 per cent surge to $1.2811, a level not reached since late July. The currency jumped 2.35 per cent last week, capping a six-session win streak against the dollar.

The euro was little changed at $1.0944 after jumping as high as $1.0980 on Friday for the first time since Jan. 12. The ECB left rates at record highs last Thursday while cautiously laying the ground to lower them later this year. In cryptocurrencies, bitcoin was last down 0.17 per cent at $68,301, as it continued to hover below the record peak of $70,175 from Friday.