The yen rose to its highest in two weeks after comments by Bank of Japan Governor Kazuo Ueda stoked speculation about another rate increase. Traders are also cautious amid signs of escalating tensions in the Middle East and ahead of the release of US payrolls data.
The yen rose against all its Group-of-10 peers after Ueda highlighted the possibility inflation momentum will strengthen, according to an interview with local media.
Brent crude extended gains above $90 a barrel after Israel's prime minister said the country will operate against Iran and its proxies and will hurt those who seek to harm it. In a shift in position, US President Joe Biden said it will support Israel depending on new steps to protect civilians.
Yields on Japan's two-year government note rose to the highest since 2011, while regional stocks fell lead by the Nikkei index.
"Ueda's comments provide a degree of pressure on the yen to strengthen," said Yujiro Goto, head of Japan currency strategy at Nomura Securities. "His comments on the currency and interest rates give some impression on the possibility of a rate hike".
"Dollar-yen is adjusting lower because of a sharp drop in equity prices and a corresponding drop in US yields overnight," said Hirofumi Suzuki, chief foreign-exchange strategist at Sumitomo Mitsui Banking Corp. "If stocks continue to fall in earnest from here, dollar-yen is likely to see a further adjustment of 1 to 2 yen".
USD/JPY fell 0.1% to 151.15 after slipping as low as to 150.81 earlier, the lowest since March 21.
Bloomberg Dollar Spot Index was up 0.1%, while the yield on 10-year Treasuries was steady at 4.31%.
AUD/USD declined 0.3% to 0.6567; NZD/USD was down 0.2% to 0.6013.
Source : Bloomberg
