The dollar hovered just below a three-week high against the yen on Monday as traders waited for a Federal Reserve policy meeting to see how much more the U.S. currency's interest rate advantage will widen. With many in the market looking to the Fed meeting on Tuesday for guidance on the dollar's future path, the yen hardly reacted to weaker-than-expected industrial production data from Japan. An increase in the fed funds rate to 4.50 percent from 4.25 percent is already seen as a done deal, but traders were eager to comb over the Fed's post-meeting statement for clues about when the bank will stop its tightening campaign. Some say a bump up on Tuesday would likely mark the end of a tightening campaign the Fed started in June 2004 and had helped to push the dollar up 15 percent against the yen and the euro last year. But expectations are building that the central bank could keep raising after this week's gathering, helping to attract more investor funds to the dollar from lower-yielding currencies, especially the yen. "I still think the U.S. interest rate will be raised to 4.75 percent and above," said a trader at a Japanese bank. "U.S. consumption is firm. So are U.S. stock and housing prices." As of 0550 GMT, the dollar was fetching 117.35 yen . That was slightly up from the level in late U.S. trade on Friday, when the dollar hit a three-week high of 117.45 yen. Earlier selling by Japanese exporters had pushed the dollar down to near 117 yen, where the U.S. currency met solid bids from Japanese investors, traders said. The dollar has recovered about half of the eight yen it lost between early December -- when it rose to a three-year high of 121.40 yen -- and early January. "I think the dollar/yen is at a watershed, after having achieved half of a retracement from its recent low," said Kotaro Kunimochi, director of forex trading at Barclays Bank in Tokyo. "I won't do anything. I'll just follow whichever way the market goes from now on." The euro was little changed at $1.2095 . It was changing hands at 141.95 yen off a six-week high of 142.45 yen hit on Friday. The pound was also little changed at $1.7670 . It had slipped on comments by Kate Barker, a member of the Bank of England's Monetary Policy Committee, who told the Guardian newspaper that growth may fall short of the central bank's forecasts made in November.