(Reuters) -The U.S. dollar snapped a six-day rally against the yen and extended a three-day falling streak versus the euro on Monday, as investors welcomed a possible U.S.-China trade deal and braced for a week packed with central bank meetings.

The U.S. Federal Reserve wraps up its two-day policy meeting on Wednesday, and rate decisions from the European Central Bank and the Bank of Japan are due on Thursday.

U.S. President Donald Trump said on Monday the U.S. and China were set to “come away with” a trade deal. He is expected to meet Chinese President Xi Jinping later this week in South Korea.

The Chinese offshore yuan rose to a more than one-month high against the dollar of 7.1028, up 0.28% on the day.

Prior to the market open, the People’s Bank of China set the official yuan midpoint rate at 7.0881 per dollar, the strongest since October 15, 2024, and above a Reuters estimate of 7.1146.

“People’s Bank of China continued to fix dollar/yuan lower,” said Chris Turner, global head of forex research at ING, questioning whether such a move is just a gesture of goodwill ahead of Thursday’s Trump-Xi meeting, or a sign that China wants to boost its domestic demand.

“Either way, a stronger renminbi is normally supportive for global emerging market currencies and a mild dollar negative,” he added.

China stocks closed at their highest point in more than 10 years on Monday.

“Monday mania returns with global equity markets higher, bonds down, and gold and the dollar lower,” said Bob Savage, head of markets macro strategy at BNY, before mentioning a possible U.S.-China deal.

The Australian dollar gained 0.65% versus the greenback to $0.6557 as signs of progress in trade talks bolstered demand for higher-yielding assets.

EYES ON BOJ AND ECB MEETINGS

The dollar ended a six-session rising streak against the yen, which has been pressured by the appointment of new Prime Minister Sanae Takaichi, seen as a fiscal and monetary dove. Surging oil prices added further pressure on the currency and other oil-importing peers.

The greenback was down 0.20% at 152.59, after hitting 153.26, its highest since October 10, in Asian trading.

Several analysts expect the so-called Japanese fiscal premium – due to concerns about Japan’s government spending outlook – to remain elevated and limit the scope for yen appreciation.

Meanwhile, with the ECB expected to keep both its policy stance and messaging unchanged this week, market attention will shift to Thursday’s BoJ meeting, where any hawkish signals could lend support to the yen.

The BoJ is likely to debate this week whether conditions are right to resume rate hikes as worries about a tariff-induced recession ease, though political complications may keep it on hold for now.

FED EXPECTED TO CUT BY 25 BPS

With a 25-basis-point Fed rate cut long priced in, markets will closely watch for any signs that the central bank may be preparing to wind down its quantitative tightening programme (QT).

Barclays strategists said the most market-moving outcome would be “an immediate end of QT along with a signal for imminent outright bill purchases to shore up bank reserves.”

They noted that similar shifts in the past have typically lifted risk assets, which are now showing a stronger positive correlation with the dollar.

The dollar index, which measures the greenback against some major peers, fell 0.18% to 98.77.

“There is deep awareness and desire to avoid a repeat of repo market strains witnessed in 2019,” said Erik Weisman, Chief Economist and Portfolio Manager of MFS Investment Management.

“Consequently, the Fed may signal that it will provide concrete guidance on ending QT in December, with the potential for a surprise announcement ending QT even sooner,” he added.

The euro rose 0.15% to $1.1646.

Robust euro zone data last week bolstered expectations that the ECB will keep interest rates elevated for longer, offering fresh support to the single currency.

Surveys showed on Monday German business morale rose in October, while euro zone firms remained optimistic about their prospects.

(Reporting by Stefano Rebaudo. Editing by Muralikumar Anantharaman, Mark Potter and Andrew Heavens)