The US dollar was broadly weaker in late Asian trading after comments by Bank of Japan Governor Toshihiko Fukui sparked a sharp surge in the yen, triggering hefty stop-loss dollar selling against other currencies, dealers said.
At 3.53 pm (0753 GMT) here, the dollar was at 117.60 yen, down from 118.16 yen in Tokyo nearly four hours earlier. The euro was at 1.1906 usd, up from 1.1893 usd in Tokyo.
Fukui told the fiscal and finance committee of the upper house of the Diet in Tokyo that the year-on-year rise in the core Japanese consumer price index (CPI) is well supported by a prolonged recovery in the economy.
"The CPI's rise was only 0.1 pct up to December, but things that are supporting it are fairly firm," Fukui said.
He also told the committee that the bank will guide short-term interest rates gradually toward "neutral levels" after its present ultra-easy monetary policy is ended, and that he expects to see a yield curve emerging in the Japanese money market.
His comments were seen as a signal that the Bank of Japan feels conditions are almost right for it to end its present policy, and this sparked broad-based dollar-yen and cross-yen selling, dealers said. The Japanese central bank has vowed to maintain its present policy until the core CPI posts steady gains and there is no sign of the economy slipping back into deflation.
Many economists have forecast that the bank will switch its policy back to one based on an interest-rate target around April. The euro remained trapped in its recent 1.1850-1.1950 usd range as the market continued to focus its attention on Japan.