The dollar rose sharply in Asia Monday as dealers sold yen on fading excitement about a possible policy shift at the Bank of Japan. The dollar was trading at 117.04 yen in Tokyo midafternoon, up 0.70 yen from late Friday in New York. Buying by U.S. and European banks and hedge funds sent the dollar as high as 117.17 yen, as those who had bought the yen aggressively last week dumped them as they realized that Japanese interest rates will probably not rise for some time. The Bank of Japan is set to meet this week to discuss monetary policy, and expectations are high that the bank will exit from what is known as "quantitative easing." Under that policy, which has continued for the last five years, the central bank flooded the banking system with excess cash to encourage lending and keep economic recovery going at a time when interest rates were already at zero. "Given that an end to quantitative easing will not also bring with it an end to zero interest rates, it is undeniable that the market slightly overreacted," said Tomoo Onishi, senior customer dealer at Deutsche Securities. Other dealers said the market has already factored in the possibility of a policy shift, and that was why the yen wasn't gaining despite data on the consumer price index released Friday. The government said the core consumer price index rose at its fastest pace in eight years in January, a sign that Japan was beating deflation, the continuing decline in prices, which threaten economic growth. Such indicators are likely to signal a go-ahead for the Bank of Japan to scrap its easy monetary policy. Anticipation about a change has been growing so much that the yen may even get sold if the bank decides to delay on a policy shift later this week, Onishi said. The euro temporarily surged to a one-month high against the dollar of US$1.2094 before settling to US$1.2068 from US$1.2037 Friday. Recent hawkish comments by European Central Bank President Jean-Claude Trichet have made it more attractive to hold the European currency, traders said. "The euro has become more attractive. There's a feeling in the market the ECB will raise rates further, after Trichet last week said the bank's policy remained 'accommodative,"' said Mitsuru Sahara, senior foreign-exchange manager at the Bank of Tokyo-Mitsubishi UFJ.