The dollar rallied against the yen and other major currencies on Monday as investors looked ahead to U.S. inflation data after Friday's mixed payrolls report sparked uncertainty about the size of a Federal Reserve rate cut next week.

The yen weakened more than 1% to 143.56 per dollar, retreating from a one-month high of 141.75 touched last week when concerns about the U.S. economy boosted demand for safe haven assets.

The Swiss franc, also considered a safe haven currency, dropped 0.7% to 0.8489 per dollar. It touched an eight-month high versus the dollar on Friday.

Against a basket of currencies, the dollar edged up 0.41% to 101.61.

Focus turned to Wednesday's U.S. inflation report as the next indicator that could shape expectations for the outcome of the Fed's September meeting.

Friday's highly anticipated U.S. jobs data failed to offer clarity on the question of whether the Fed would deliver a regular 25 basis point rate cut or an outsized 50 bps one at its Sept. 17-18 policy meeting.

While employment increased less than expected in August, the jobless rate ticked lower and wage growth remained solid, indicating that the U.S. labour market was cooling, but not at a pace that warranted panic over the economy's growth outlook.

"The initial relief rally for the U.S. dollar has been driven by the paring back of expectations for the Fed to deliver larger 50 bps rate cut at the next policy meeting," MUFG strategist Lee Hardman said.

Markets fully price in a 25 bps rate cut next week and a roughly 25% chance of a bigger, half-point move. On Friday, pricing for a big cut was as high as 50%.

Fed policymakers on Friday signalled they are ready to kick off a series of rate cuts, noting a cooling in the labour market that could accelerate into something more dire in the absence of a policy shift.

ECB PATH CLEARER

The euro slipped 0.4% to $1.10428 against the dollar ahead of Thursday's European Central Bank's policy meeting. The ECB is widely expected to cut rates by 25 bps to 3.50%, having kicked off its rate cutting cycle in June with a quarter-point cut.

Traders price in a 52% chance of a similar move in December.

"The ECB path is much clearer than the Fed, having already started its rate cutting cycle," said Mohit Kumar, chief economist Europe at Jefferies.

"We expect the ECB to cut at a gradual pace of 25 bps a quarter for the coming meetings, data dependent, and move its rates below 3%."

The British pound eased 0.3% to a more than two-week low of $1.3087 ahead of a slew of economic data this week that could shape expectations around the Bank of England's policy moves this year.

The Norwegian crown touched a four-week low against the dollar at 10.81, while the Swedish crown fell to a three-week low of 10.37 crowns per dollar.

(Reporting by Rae Wee in Singapore and Sruthi Shankar in London; Editing by Shri Navaratnam, Jacqueline Wong, Alison Williams and Christina Fincher)