Last week, European policy makers stepped up their calls for Asia to bear more brunt of the dollar's decline, helping the yen strengthen as investors priced in the risk of stronger language from the G7 communique in early February.
So far, the euro has shouldered much of the three-year fall in the U.S. currency, gaining about 50 percent against the dollar since early 2002. In the same period, the yen gained only about half of that.
The euro's strength is causing much concern throughout Europe about losses in competitiveness and policy-makers would like to see Asia take on more of the dollar weakness still expected in the future.
Investors expect G7 nations to repeat their calls on Asian countries to adopt more flexible foreign exchange regimes.
And many traders would interpret such a statement as asking China, which pegs its yuan to the dollar, to allow its currency to rise -- a move that would likely buoy other Asian currencies, including the yen, given strong economic ties in the region.
Policy-makers speaking about the need for stronger Asian currencies last week included European Central Bank (ECB) President Jean-Claude Trichet and chief economist Otmar Issing.
Issing is due to speak again on Wednesday, and analysts said his comments would be closely watched, as would those of a series of U.S. Federal Reserve officials including Gary Stern, Ben Bernanke and Janet Yellen, who will also speak to the press this week. Meanwhile, capital flows data from the U.S. was likely to put worries about the dollar again in the spotlight.
Much of the dollar's decline had been driven by worries that one day the U.S. may struggle to finance its growing current account deficit with foreign capital inflows. The shortfall rose to a record $60.3 billion in November.
"One risk is that we have seen large amount of U.S. investors moving capital to foreign stocks. If that trend continues that may offset any seasonal increase in foreign inflows into the U.S." said Trevor Dinmore, currency strategist at Deutsche Bank in London.
The dollar has also gained some support in recent sessions from expectations that the Federal Reserve, which has already raised its benchmark funds rate five times since June, will continue its credit tightening campaign.
The market expects the U.S. central bank to raise rates by 0.25 percentage point at each of the next three policy meetings in February, March and May.
That would bring the U.S. short-term interest rate to 3.0 percent by mid-year, widening its yield advantage over the euro, which yields 2.0 percent at present.