The U.S. dollar briefly rose to the lower 145 yen range in Tokyo on Monday after topping the 145 yen line for the first time since Japan intervened in the currency market in late September, as U.S. economic data showing strong inflation fueled speculation of aggressive interest rate hikes in the world's largest economy.
At 5 p.m., the dollar fetched 145.02-04 yen compared with 144.70-80 yen in New York and 144.31-33 yen in Tokyo at 5 p.m. Friday.
The euro was quoted at 0.9811-9812 and 142.28-32 yen against $0.9795-9805 and 141.92-142.02 yen in New York and $0.9832-9834 and 141.89-93 yen in Tokyo late Friday afternoon.
Earlier in the day, the dollar at one point rose to 145.40 yen after U.S. economic data late last week showed the country's personal spending increased 0.4 percent in August from the previous month, up from a fall of 0.2 percent in July.
The reading fueled the view that the Federal Reserve will continue raising interest rates to control rising inflation in the country, which would widen the interest rate gap between the United States and Japan as the Bank of Japan is set to maintain its ultraloose monetary policy for two to three years, dealers said.
The U.S. currency, however, soon slid back to the upper 144 yen range as a cautious mood prevailed in the market after Finance Minister Shunichi Suzuki reiterated Monday that Japan is ready to respond "resolutely" to volatile yen movements.
Takuya Kanda, senior researcher at the Gaitame.com Research Institute, warned of a further rise in the U.S. currency.
"Investors will cautiously try the 145 yen line a few times, and if Japan does not intervene then the dollar will surge to the next milestone at the 147 yen level with the full speed."
On Sept. 22, Japan spent 2.84 trillion yen ($19 billion) in its first yen-buying, dollar-selling intervention since 1998, conducted after the U.S. unit hit a fresh 24-year high of 145.90 yen.
Japanese stocks meanwhile ended higher as buybacks erased earlier losses following weaker-than-expected results from the Bank of Japan's Tankan business survey.
The 225-issue Nikkei Stock Average ended up 278.58 points, or 1.07 percent, from Friday at 26,215.79. The broader Topix index finished 11.64 points, or 0.63 percent, higher at 1,847.58.
On the top-tier Prime Market, gainers were led by marine transportation, transportation equipment, and mining issues.
Stocks opened lower after the BOJ's Tankan business survey, released shortly before the start of regular trading, showed sentiment among major Japanese manufacturers unexpectedly worsened in September for the third straight quarter.
The quarterly survey also said sentiment among large nonmanufacturers is likely to drop over the coming months, reflecting fears over a slow recovery in the tourism industry, weighing on related issues such as department stores, analysts said.
But stocks later turned positive as investors scooped up companies that have seen their share prices underperform lately, supported by hopes that Wall Street may rebound later in the day after U.S. futures halted their decline, brokers said.
Analysts also pointed to the possibility of pension funds buying issues across various sectors as shares have been trading at a low level recently, with the Nikkei index trading below the 26,000 mark in early trading.
Among Prime Market issues, advancing issues outnumbered decliners 893 to 883, while 55 ended unchanged.
Isetan Mitsukoshi Holdings slid 33 yen, or 2.7 percent, to 1,194 yen and J. Front Retailing shed 21 yen, or 1.8 percent, to 1,155 yen.
Automakers rebounded after losses Friday, with Toyota Motor gaining 65.5 yen, or 3.5 percent, to 1,941.5 yen, and Subaru climbing 66 yen, or 3 percent, to 2,233 yen.
Trading volume on the Prime Market fell to 1,269.34 million shares from Friday's 1,520.29 million.
The yield on the bellwether 10-year Japanese government bond dipped 0.005 percentage point from Friday's close to 0.240 percent, tracking a downward trend with super long-term bonds.