Dollar at a three-month high (page 2 of 2)

The Bank of Japan's quarterly Tankan survey of business confidence was plus 19 for September, up from the June survey but slightly below financial market's expectations for a reading of plus 20.

Meanwhile, Bank of Japan Governor Toshihiko Fukui said the central bank could not keep its super-loose monetary policy in place forever; however, he added any shift in the policy would not be rushed.

His comments came as speculation mounted that the central bank would soon end its four-year-old "quantitative easing" policy of flooding the banking system with excess cash as consumer prices recover from seven years of deflation.

The BoJ has pledged to maintain the policy until the core consumer price index, which excludes volatile fresh-good costs, shows a consistent rising trend.

Japan will be closed on Monday for Health-Sports day. On Tuesday Bank of Japan will start its two day meeting.

Range for this week: Y112.25-Y115.25

Sterling

Sterling started the week under pressure against the dollar and ignored the survey showing British manufacturing activity unexpectedly expanded at its fastest pace in six months in September.

The Chartered Institute of Purchasing and Supply/RBS purchasing managers' index rose to 51.5, the highest since March, from 50.3 in August. The forecast was for a fall to 50.

As the week progressed sterling recovered from a two-month low against the dollar as the U.S. currency succumbed to some mild profit taking after the recent rally. British service sector came in line with market expectations.

The Chartered Institute of Purchasing and Supply/RBS said its services Business Activity Index fell to 55.0 last month from 55.2 in August. As expected the Bank of England left interest rates unchanged at 4.5 percent.

Most economists expect the Bank of England to cut interest rates again to spur growth. Sterling failed to hold to its gains against the dollar after the release of weaker than expected U.K manufacturing data.

Manufacturing output fell 0.2 percent in August, compared with expectations for a 0.1 percent rise, the first monthly fall since March.

Range for this week: $1.7455-$1.7755