TOKYO, Sep 3 (Reuters) The dollar shuffled sideways against the euro and yen on Monday as investors

TOKYO, Sep 3 (Reuters) The dollar shuffled sideways against the euro and yen on Monday as investors looked ahead to see if this week's slate of U.S. economic data would show the turmoil in credit markets was taking a toll on growth.

The dollar hovered near a three-week low against a basket of major currencies as market players have started to focus more on the U.S. economy and potential damage from the unfolding subprime mortgage crisis that has stoked expectations for a rate cut.

Data later this week includes U.S. manufacturing activity in August on Tuesday, the Federal Reserve's beige book summary of the economy's performance on Wednesday and the monthly jobs report on Friday.

Market players are also looking to see whether the European Central Bank raises rates at a meeting on Thursday after ECB President Jean-Claude Trichet has sought to keep options open after the flare-up of market volatility in the past month.

Currency trading was expected to be subdued with U.S. markets closed for the Labour Day holiday.

The dollar was little changed from late U.S. trade near 115.80 yen The euro also barely budged near $1.3625 At the Kansas City Fed's conference on housing and monetary policy over the weekend, Fed Chairman Ben Bernanke repeated that the central bank would take all necessary steps to protect the economy from the market volatility but would not bail out lenders or investors suffering big losses.

''There was some disappointment that Bernanke was not clearer in signalling that the Fed will lower rates on Sept. 18,'' said currency strategists at RBC Capital Markets in a note to clients.

Investors are looking for the Fed to cut rates by at least 25 basis points to 5.0 percent from the current 5.25 percent at its next policy meeting in mid-September.

The Fed has cut its discount rate for direct lending to banks and has pumped billions of dollars of temporary funds into the banking system to ease a money market crunch stemming from the worries about financial firm exposures to subprime mortgages.

Martin Feldstein, a prominent economist once considered a top candidate to be Fed chief, said the weak housing market could lead to a full-blown recession and the Fed should slash rates aggressively.

The market shrugged off Japanese data showing capital spending posted a surprising drop during the second quarter, falling 4.9 percent year-on-year compared with forecasts for an 11.5 percent increase.

The yen's moves have been dictated by the willingness of market players to sell the low-yielding currency for high-yielding currencies in the carry trade when rising global equity markets suggest risk appetite is improving.

In early trade, the Nikkei share average dipped 0.3 percent despite gains of more than 1 percent on Wall Street last Friday.

Reuters BJR VP0632