As traders consider the potential that the Federal Reserve's tightening cycle is coming to an end, the U.S. dollar moved up in early European trade on Monday, although it is still on track to post a monthly loss. In contrast, the Japanese yen declined following the Bank of Japan's change in monetary policy.

The dollar index that gauges the greenback versus its major pairs advanced by 0.2% at 101.570.

The dollar has had a good start to the new week, but it continues to be on track for its second consecutive losing month, a monthly fall of about 1%.

Interest rates were raised by the U.S. Federal Reserve last week, but speculation is increasing that this would be the final increase in the central bank's aggressive tightening cycle, which has been going on for a year.

On Friday, the second-quarter ECI statistic, which peaked at 1.4% in the first quarter of 2022, was reported at 1.0%, down from 1.2% in the first quarter. Accordingly, there are more justifications for the Fed's officials to remain silent in September as the inflationary pressure brought on by rising wages appears to be easing.

EUR/USD dipped to 1.1014, following European Central Bank President Christine Lagarde indicated at a break in its tightening cycle as soon as September, and in advance of the release of important eurozone inflation and economic statistics.

GBP/USD rose before the Bank of England's policy meeting later this week, where a quarter-point rate hike is anticipated.

USD/JPY added 0.5% to 141.88, the Bank of Japan broadened its yield curve management policy, allowing the 10-year yield to wander 0.5% around the 0% target, and the yen extended Friday's losses following a choppy session.