The dollar held its ground on Monday, retaining its recent gains fuelled by robust inflation data, while the yen hovered close to the psychologically significant 150 level. Trading activity remained subdued as US markets observed the Presidents' Day holiday, likely resulting in low trading volumes for the day.

The dollar index, which measures the currency against a basket of six major peers, remained largely unchanged at 104.23, following a 0.18 per cent increase the previous week. The index had reached its highest level since mid-November last Tuesday, reaching 104.97, in response to stronger-than-expected US inflation figures for January. However, it experienced a slight retreat on Thursday after retail sales data for the same month showed a decline.

Chris Turner, Global Head of Markets at ING, noted that despite favourable data, the dollar struggled to maintain its gains throughout the week, prompting speculation about the appropriate pricing of the Federal Reserve's interest rate cycle.

The euro remained steady at $1.0777, having rebounded from a three-month low of $1.0695 recorded last week. Similarly, sterling saw a modest increase of 0.1 per cent to $1.2612.

Investors are keenly awaiting survey-based Purchasing Managers' Index (PMI) data for insights into the economic health of the eurozone and the UK in February, scheduled for release later this week. Additionally, the release of minutes from the Fed's last meeting on Wednesday is expected to be a key focal point for investors.

Market expectations regarding Fed rate cuts have notably decreased, with money market pricing indicating a forecast of around 90 basis points of cuts this year, compared to approximately 145 basis points at the beginning of February.

Against the yen, the dollar slipped by 0.16 per cent on Monday, reaching 149.97 yen. Despite this slight decline, the dollar has maintained a significant 6 per cent increase against the yen since the start of the year, buoyed by Japan's persistent ultra-loose monetary policy, which has resulted in a substantial yield gap between the two countries' bonds.

Speculation regarding potential intervention by Japanese authorities to stem the yen's decline has intensified, with Finance Minister Shunichi Suzuki expressing concerns about rapid currency movements. Weekly data from the US markets regulator revealed a further increase in speculators' net short position against the yen, reaching a more than two-month high of $9.2 billion.

Meanwhile, China's onshore yuan exhibited minimal movement as investors returned from the Lunar New Year break, despite a surge in tourism revenues during the holiday period, trading at approximately 7.1983 per dollar.

(With Reuters inputs)