LONDONSYDNEY, July 17 Reuters The dollar edged lower on Monday against a basket of currencies after suffering its biggest weekly drop of the year as traders waited on economic data and policy decisions before selling it down any further.

The euro continued climbing, rising 0.15 to hit a fresh 16month high at 1.12440. Versus the yen the dollar fell 0.27 to 138.38 yen per dollar, after touching on Friday its lowest against the Japanese currency in two months.

Last weeks U.S. disinflation shock altered the FX landscape, but a few days without key data releases will tell us whether that impulse can keep the dollar on the back foot as the FOMC risk event draws nearer, said Francesco Pesole, FX strategist at ING.

Eurodollar appears a bit overstretched in the short term and could face a correction this week, he added.

Last week39;s U.S. inflation data fuelled investors39; bets that the Federal Reserve was close to the end of its rate hike cycle, and the dollar index had its biggest weekly decline since November 2022, falling 2.25 on the week.

U.S. producer prices barely rose in June and the annual increase in producer inflation was the smallest in nearly three years, data showed on Thursday, a day after data showed consumer prices rose modestly last month.

Hikes are expected from the Fed and European Central Bank next week, but beyond that market pricing implies the Fed will likely stop, before cuts next year, while in Europe another hike probably beckons.

The FX…