TOKYO - The dollar traded in a tight range in Asia Monday ahead of a US Federal Reserve monetary policy meeting this week, dealers said.

The greenback was down to 96.07 yen in Tokyo morning trade from 96.31 in New York late Friday.

The euro fell to $1.3898 from $1.3934 and to 133.53 yen from 134.20.

The US unit briefly dived below the 96-yen level early in the morning.

It recovered somewhat but remained range-bound as investors looked to the Fed meeting from Tuesday for clues on the outlook for interest rates, dealers said.

"Ahead of that major event this week, the dollar is not moving much," said Hideaki Inoue, chief manager at forex trading at Mitsubishi UFJ Trust and Banking Corp. "Investors are in waiting mode."

Inoue said the dollar "may test the 94-yen level this week," noting a trend since last week of investors showing more confidence in a global economic recovery and moving away from the safe-haven US currency.

"In the longer term, I think market sentiment will start dipping after this summer, especially as investors have already factored in the best possible scenario for recovery," he added.

Some US data had been positive and helped raise market sentiment, but consumption remained stagnant, Inoue said.

"US companies will probably have to slash more jobs while the private sector will also need to repay the injected public funds," he said.

Market players were also carefully watching a move by Washington this week when the US government is to issue a record $104 billion in new bonds.

The European single currency will likely remain under pressure due to persistent concerns for the financial system in the region, he said.