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By Herbert Lash and Harry Robertson
NEW YORK/LONDON (Reuters) -The dollar edged higher on Monday ahead of a slew of central bank meetings this week, with the Bank of Japan potentially set to end negative interest rates and the market waiting for the Federal Reserve's latest projections for its rate cut plans.
In addition to Japan and the United States, central banks in Britain, Australia, Norway, Switzerland, Mexico, Taiwan, Brazil and Indonesia are all due to meet this week.
The dollar index, which measures the U.S. currency against six other major currencies, rose 0.145% at 103.600. It has strengthened just over 2% this year as the U.S. economy has fared better than expected, leading investors to rein in bets that the Fed will cut rates quickly and deeply this year.
Markets are now pricing in less than three cuts of 25 basis points each in 2024, down from almost double that at the year's start, LSEG data shows. Futures show about a 51% chance of the first rate cut coming by June, also down sharply from earlier expectations, according to CME Group's FedWatch Tool.
The yield on benchmark 10-year Treasury notes rose to a three-week high of 4.348%. The advance adds to dollar strength as the market sees rates staying higher for longer.
The focus on Wednesday will be on whether Fed policymakers change their projections, or dot plots, for the economy and rate cuts for this year and the next two. The Fed in December projected 75 basis points of easing in 2024.
"I think they're going to stay with three cuts, but if they change, it's more likely to be to two cuts, rather than four," said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York. "One thing that could surprise people would be that the median dot goes up for unemployment."
The Japanese yen traded little changed, up 0.05% at 149.16 per dollar.
The yen has had a whirlwind few weeks, weakening to 150.88 to the dollar last month. It then rebounded to a one-month high of 146.48 at the start of March, on the back of stronger-than-expected economic data and rising bets that the BOJ is preparing to end eight years of negative interest rates.
Bigger-than-expected pay hikes by major Japanese firms have cemented expectations that the BOJ will exit ultra-loose monetary policy, potentially as soon as at its meeting on Tuesday.
"Recently there have been some signs and some statements from a few of the members of the Bank of Japan signaling that they feel this is a time to not maintain an accommodative financial environment," said Juan Perez, director of trading at Monex USA in Washington. "But this week it’s really doubtful that they’re going to make a move. They would shock markets."