The dollar inched towards a fresh three-month low against the yen on Tuesday, extending losses made the previous day after finance officials around the world cranked up pressure on China to allow the yuan to strengthen. The U.S. currency dropped as much as 2 percent on Monday after the Group of Seven economic powers at the weekend called on China and other emerging economies to let their currencies rise to alleviate global trade imbalances. European Central Bank President Jean-Claude Trichet echoed the weekend's G7 communique by emphasising on Monday that not only China, but all such economies had to do their bit to help correct the imbalances. Dollar weakness has been compounded by renewed international concern over the ballooning U.S. trade deficit as well as moves by central banks in Sweden and Qatar to diversify their forex reserves away from the dollar. These woes come amid expectations the Federal Reserve has nearly ended its two-year run of raising interest rates, a key dollar support in 2005, with traders saying the currency's recent weakness could signal the start of a selling trend. "Given that the dollar/yen has fallen this far, a rebound to 115 yen seems difficult at this point," said Shigeru Komatsu, forex manager at Sumitomo Trust and Banking. By 0305 GMT, the dollar had edged down to around 114.55 yen , in sight of the three-month low of 114.24 yen struck the previous day. Traders said that the dollar's slide had set off an unwinding in yen carry trades -- in which investors borrow in the low-yielding yen to buy higher yielding assets overseas -- and that had exacerbated losses. But they added that the U.S. currency received some support from U.S. banks' buying in the lower 114 yen region, as well as from Japanese importers interested in buying dollars on the cheap around those levels.