The U.S. dollar strengthened to a two-month high above the 159 yen line in Tokyo on Friday after comments from a Federal Reserve official reduced expectations that the central bank will cut interest rates soon.
The rise came after the official expressed the view that U.S. inflation could remain above the central bank's 2 percent target for another one to two years. Investors have been selling the yen for the dollar amid a wide interest rate differential between Japan and the United States.
At 3 p.m., the dollar fetched 158.95-98 yen compared with 158.90-159.00 yen in New York and 158.27-28 yen in Tokyo at 5 p.m. Thursday.
The euro was quoted at $1.0716-0720 and 170.33-41 yen against $1.0697-0707 and 170.03-13 yen in New York and $1.0724-0725 and 169.74-78 yen in Tokyo late Thursday afternoon.
The yen's latest slide came as the United States put Japan back on its currency manipulator watch list Thursday after Japanese authorities conducted yen-buying interventions to support the currency in April and May.
"There were some views that (Japan's return to the watch list) would make it harder for Japanese authorities to stage a yen-buying, dollar-selling intervention," said Takuya Kanda, senior researcher at the Gaitame.com Research Institute.
However, the dollar lost momentum to trade mostly in the upper 158 yen range as wariness over a currency intervention revived after the Japanese finance minister said the designation does not mean the United States sees Japan's currency policy as "problematic," Kanda said.
Market participants see the yen sliding below the 160 line to the dollar as a possible trigger for intervention by authorities. They apparently stepped into the market after it fell to as low as 160.24 on April 29.
Tokyo stocks ended flat after directionless trading, as gains supported by rises on the U.S. Dow Jones index were offset by selling of semiconductor issues after the tech-heavy Nasdaq declined.
The 225-issue Nikkei Stock Average ended down 36.55 points, or 0.09 percent, from Thursday at 38,596.47. The broader Topix index finished 0.85 point, or 0.03 percent, lower at 2,724.69.
On the top-tier Prime Market, gainers were led by marine transportation and insurance issues, while leading decliners were warehousing and harbor transportation service and electric power and gas issues.
