By Gertrude Chavez-Dreyfuss

NEW YORK The Japanese yen climbed to a two-week peak against the dollar on Monday after a report said the Bank of Japan is considering tweaking its yield curve control policy to allow the 10-year Japanese government bond yield to rise above 1%.

The Nikkei report pushed the yen to 148.81 per dollar, its strongest level since Oct. 17. The greenback, which has been on the defensive all day, was last down 0.4% at 149.05 yen.

Surging global interest rates have heightened pressure on the BOJ, which kicked off its two-day monetary policy meeting on Monday, to change its bond yield control policy, in which it maintains its -0.1% short-term interest rate target and a 0% cap on the 10-year bond yield.

"If the BOJ does not do anything tomorrow, which I think that's what economists expect and just wait until December, I think the dollar jumps right back versus the yen," said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

But with Monday's action, Chandler thinks Japanese intervention seems unlikely, although he noted that in the last few weeks, the BOJ has intervened in the bond market as an alternative.

"The key to intervention is excessive volatility and the BOJ has been saying this: that it's not targeting a particular level. So that's taking the magic away from the 150 mark," he said.

Aside from the BOJ, market participants are looking ahead to interest rate decisions from the U.S. Federal Reserve and the Bank of England (BoE).

A deluge of purchasing managers' surveys, euro zone inflation and GDP data, and U.S. nonfarm payrolls are also due for release this week.

"The U.S. dollar is sliding a little this morning, but not in any measure that puts it trading outside recent ranges," said Helen Given, FX trader at Monex USA in Washington.

"If consumer data domestically hadn't been so strong last week, we'd probably be looking at a bigger slide for the dollar, but markets are still finding it quite difficult to discount the resilience of the U.S. economy."

Analysts also pointed to the U.S. Treasury's quarterly refunding announcement on Wednesday that could move both the bond and currency markets.

That comes as mounting deficits and a heavier interest rate burden have substantially increased the U.S. Treasury's funding needs. Since the last announcement in August, borrowing rates have spiralled to their highest since 2006-07.

The dollar index was last down 0.4% at 106.13, after earlier falling to a one-week low of 106.06, hurt by a pick-up in the euro. The euro was last up 0.5% at $1.0615.

In the mix in Europe on Monday was cooling German state inflation data, which pointed to slowing headline inflation in the euro zone's largest economy, and a separate release showing German gross domestic product fell by 0.1% quarter on quarter in the third quarter, though this was above expectations.

Later this week, the Fed and BoE are both expected to keep rates steady so, barring any surprises, the focus will be on the message from policymakers.

The pound was up 0.2% at $1.2141.

U.S. nonfarm payrolls data on Friday will also be important for expectations of the Fed's rate hike path. Wall Street economists are expecting new U.S. jobs of 188,000 for the month of October, according to the Reuters poll.

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Currency bid prices at 2:24PM (1824 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 106.1200 106.6000 -0.43% 2.541% +106.7100 +106.0600

Euro/Dollar $1.0614 $1.0565 +0.46% -0.94% +$1.0625 +$1.0547

Dollar/Yen 148.9650 149.6500 -0.44% +13.64% +149.8450 +148.8100

Euro/Yen 158.11 158.10 +0.01% +12.69% +158.9200 +157.7000

Dollar/Swiss 0.9018 0.9021 -0.03% -2.47% +0.9048 +0.9010

Sterling/Dollar $1.2158 $1.2123 +0.31% +0.55% +$1.2164 +$1.2090

Dollar/Canadian 1.3830 1.3872 -0.30% +2.07% +1.3872 +1.3814

Aussie/Dollar $0.6374 $0.6334 +0.67% -6.45% +$0.6384 +$0.6333

Euro/Swiss 0.9570 0.9535 +0.37% -3.28% +0.9583 +0.9526

Euro/Sterling 0.8727 0.8713 +0.16% -1.32% +0.8740 +0.8708

NZ $0.5837 $0.5809 +0.45% -8.10% +$0.5844 +$0.5805

Dollar/Dollar

Dollar/Norway 11.1410 11.1820 -0.24% +13.66% +11.1880 +11.1070

Euro/Norway 11.8270 11.8024 +0.21% +12.73% +11.8504 +11.7805

Dollar/Sweden 11.1385 11.1478 +0.59% +7.02% +11.1798 +11.1179

Euro/Sweden 11.8182 11.7487 +0.59% +6.00% +11.8377 +11.7729

(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Alun John in London and Rae Wee in Singapore; Editing by Miral Fahmy, Mark Potter, Andrea Ricci and Alexander Smith)