The dollar held near a five-month high against the yen on Thursday, supported by expectations for higher U.S. interest rates, while investors sought reasons to buy the currency in the absence of any major economic news.
The U.S. currency rose to 108.90 yen on Tuesday, its highest level since Oct. 19 and up more than 5 percent in less than a month on hopes that the Federal Reserve might boost the pace of its credit tightening to nip inflation at the bud.
"The forex market shouldn't hold on too much for too long to the interest rate difference, or to expectations the U.S. will accelerate the pace of interest rate hikes," said a trader at a European brokerage.
"The market is trying to justify buying dollars at the moment."
By 9:04 p.m. EDT Wednesday, the dollar bought around 108.70 yen little changed from the late U.S. level.
The euro was flat at around $1.2865 off a two-month low of $1.2800 hit on Tuesday, according to electronic trading platform EBS.
The single European currency rose to just above 140.00 yen for the first time in three weeks, due to hefty buying of cross currencies by Japanese investors at the start of the new financial year.
With most in the market expecting the Fed to raise rates at its next two meetings in May and June, the dollar was supported by the advantage it has over currencies in countries where rates are not expected to rise any time soon.