The U.S. dollar briefly hit a two-month high near the 160 yen line in Tokyo on Monday, after stronger-than-expected U.S. economic data late last week dented prospects for an imminent interest rate cut by the Federal Reserve.
But wariness over a possible yen-buying operation by Japanese authorities prevented the dollar from crossing the threshold after an apparent previous intervention came when the yen fell to as low as 160.24 to the dollar on April 29.
At noon, the dollar fetched 159.68-73 yen compared with 159.81-91 yen in New York and 158.76-79 yen in Tokyo at 5 p.m. Friday.
The euro was quoted at $1.0687-0691 and 170.65-77 yen against $1.0689-0699 and 170.84-94 yen in New York and $1.0678-0680 and 169.54-58 yen in Tokyo late Friday afternoon.
The dollar has been drawing buying on expectations the interest rate differential between Japan and the United States will remain wide, as U.S. interest rates are projected to stay elevated for longer than anticipated on the back of a solid economy, dealers said.
On Monday, Japan's top currency diplomat Masato Kanda warned Japan is ready to take appropriate steps against excessive volatility in the foreign exchange market at "any time."
While the latest warning "had limited effect on the market as his remarks were not new, the dollar was nevertheless top-heavy as it neared 160 yen, the level that market participants perceive as an intervention line," said Yukio Ishizuki, senior foreign exchange strategist at Daiwa Securities Co.
On the stock market, the Nikkei index was initially lower as technology issues tracked declines on their U.S. counterparts late last week. But the benchmark inched up into positive territory as the yen's depreciation lent support to export-oriented issues.
The 225-issue Nikkei Stock Average rose 92.75 points, or 0.24 percent, from Friday to 38,689.22. The broader Topix index was up 7.00 points, or 0.26 percent, at 2,731.69.
