The dollar eased versus the yen on Friday, struggling to gain traction after lacklustre US economic data further dampened already low expectations for a Federal Reserve interest rate hike next week.

Movements in major currencies were confined to relatively narrow ranges with a wait-and-see mood prevailing ahead of the September 20-21 Fed and Bank of Japan policy meetings.

The dollar eased 0.1 per cent to 102.02 yen. The greenback is down 0.7 per cent for the week, with the yen finding favour as risk sentiment soured on worries that central banks are running out of ammunition to bolster economic growth.

Data issued on Thursday showed US retail sales fell more than expected in August amid weak purchases of automobiles and a range of other goods.

Financial markets are pricing in a roughly 12 percent probability of a Fed rate hike next week, down from 15 percent before the data, according to the CME FedWatch tool.

"While the dollar/yen will keep an eye on Japanese government bond yields and equities, it is likely to be range bound around 102 yen before the BOJ policy meeting," said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

"But there is the risk of the market reacting to speculative reports on the Fed and BOJ during the media blackout period before the policy meetings."

At its meeting next week, the BOJ is due to conduct a comprehensive review of its current policy framework that combines negative interest rates with a massive asset-buying programme.

Many market players expect the BOJ to indicate a preference for a steeper yield curve to cushion the blow on banks from negative interest rates. There is also focus on whether the central bank will cut interest rates deeper into negative.

There still seem to be some expectations that the BOJ could cut interest rates deeper into negative territory, said Sim Moh Siong, FX strategist for Bank of Singapore, adding that the yen is likely to rise if the BOJ were to stand pat.

"I think the market has somewhat priced in a (rate) cut as well as a tweak to the QE programme," Sim said.

"If the BOJ stays put next week then I would expect the yen to come under some appreciation pressure, especially if the Fed stays put as well," he added.

The euro was little changed at $1.1240.

Elsewhere, the Australian dollar inched up 0.1 percent to $0.7520 after posting a 0.7 per cent gain on Thursday.

The Aussie, sensitive to shifts in broader risk sentiment, hit a seven-week low of $0.7443 earlier this week. But the commodity-linked currency has pulled up from that trough thanks to sizeable gains in prices of commodities such as copper and crude oil following a rough patch earlier this week. - Reuters