The yen was on defensive on Monday, hovering within striking distance of three-week lows against the U.S. dollar, on growing expectations the Bank of Japan could mull loosening monetary policy further this week. The Bank of Japan (BOJ) ends a two-day meeting on Wednesday and it is likely the bank will announce additional easing measures, like boosting the size or duration of its special fund-pumping operations. All in all, analysts say, the policy moves may be guided by a desire to weaken the yen in a bid to support the ailing export-reliant economy.

In early Asian trade, the yen slipped to 90.64 per dollar, from 90.42 late in New York last Friday when it fell to as low as 91.08, its lowest level since Feb 23. Solid retail sales data offered the U.S. dollar support against the yen, heading into a week when the Federal Reserve’s policy setting committee meets on Tuesday. U.S. retail sales rose unexpectedly last month despite heavy snow storms, boosting hopes of a durable economic recovery. Analysts say, since U.S. consumers are buying more and companies appear to be on the verge of hiring again, policymakers in the Fed may ponder on how long to keep its ultra-low rate pledge.

The dollar index was lower at 79.814, hovering above its short-term support level at around 79.60. The euro was firmer above USUSD1.3765 and not far from its Friday peak of USUSD1.3796.

Speculators pared back short euro positions, spurred by data which showed euro zone January industrial output record its biggest ever monthly increase. The euro was also supported by reports that euro zone ministers have agreed to a rescue strategy for Greece, if one is needed. Traders said there was also talk in the market of a large selling order around USUSD1.3800 which could be an option-related one. The euro was firmer on the yen, at 124.73 yen from 124.45 yen late in New York on Friday.

The pound slipped to USUSD1.5178, after posting robust gains on Friday. The outlook for sterling remains grim amid concerns about a hung parliament which is seen potentially hampering the government’s efforts to cut UK’s ballooning budget deficit.