The dollar was leading on Monday and held the yen close to a multi-decade low, but the fear of Japanese authorities interfering with the currency stopped the dollar from rising further.
The yen was last seen at 151.25 a dollar, having fallen as low as 151.86 last week, a four-month low that put it dangerously close to a 32-year low that was reached in 2022 at 152 a dollar.
Adding to the tone of government officials who have escalated warnings over the currency's slide in recent days, Japan's senior currency diplomat noted on Monday that the yen's present weakness was not related to fundamentals.
These moves follow the landmark interest rate increase by the Bank of Japan (BOJ) at its March policymaking meeting. It is important to note that traders also expected that Japan's rates would stay low for some time, maintaining the sharp differences in rates with the US.
According to Carol Kong, a currency analyst from the Commonwealth Bank of Australia, the verbal intervention of Japanese officials has made 152 a very significant near-term resistance for the dollar/yen pair. Markets are completely aware of a possible real FX intervention by authorities, and that is preventing the dollar/yen from rising further.
Expectations that the US Federal Reserve will likely maintain higher rates for longer while its counterparts elsewhere start to lower them have given the dollar a boost as a result of a change in the global interest rate outlook that followed a flurry of central bank meetings.
Both the Bank of England and the European Central Bank have seen a significant increase in bets for a June rate decrease after the Swiss National Bank did so last week.
Due to this, pressure has been placed on each of their currencies. The euro, which is now hovering around a three-week low, dropped 0.03% to $1.08045.
The pound weakened 0.02% to $1.25985, after falling over 1% the previous week on dovish BoE indications. Governor Andrew Bailey stated that rate reductions were in play this year, according to a Financial Times story published on Friday.
According to Chris Weston, the head of research at Pepperstone, the ECB and BoE have galvanized expectations that they will also go in June, and the BoE meeting in May even showed signals that it would be a live meeting.
On the other hand, despite market expectations that a Fed easing cycle will start in June, a string of strong US economic statistics has cast doubt on the central bank's intention to actually drop rates three times this year.
The dollar index saw a weekly increase of almost 1% last week and was last up 0.03% at 104.46.
In other news, the New Zealand dollar dropped 0.13% to $0.5987, and the Australian dollar decreased by 0.05% to $0.65115.
A decline in the value of the yuan has also put some pressure on the two, since they are both frequently used as liquid stand-ins for the Chinese yuan.
Although state-owned banks attempted to support the currency when the yuan fell below a crucial threshold on Friday, their efforts proved unsuccessful as the onshore yuan ended the domestic session at its lowest point in four months.
Pressure on the yuan has come from increased market expectations for further ease in monetary policy to support the second-biggest economy in the world.
The yuan was recently somewhat weaker against the dollar on the offshore market, trading at 7.2761.