Dollar adrift in a sea of central bank uncertainty

The dollar drifted lower in light Asian trading on Monday amid doubts about how far and fast the Federal Reserve would raise U.S. interest rates next year. 

An employee checks U.S. dollar bank-notes at a bank in Hanoi, Vietnam August 12, 2015.

The dollar eased to 121.20 yen JPY= and further away from Friday's brief peak of 123.59. The euro edged up to $0.0867 EUR= and the dollar was a shade weaker against a basket of major currencies at 98.680 .DXY.

The yen held gains made after Friday's decision by the Bank of Japan to merely tweak its stimulus campaign rather than outright expand the amount of assets it buys.

The resulting shakeout of long dollar positions was eerily reminiscent of the reaction to the European Central Bank's policy easing early in the month, which also disappointed the market's lofty expectations.

Barclays predicts the Fed will raise rates by no more than 75 basis points next year compared to the 100 basis points assumed by the FOMC.

A Reuters poll of 120 economists found the Fed would hike rates again in March, but probably would not move as quickly next year as policymakers have suggested.

Investors have reacted by pairing back what had become a very crowded wager on further gains in the dollar.