A possible strike against Syria was delayed after U.S. President Barack Obama decided to seek congressional approval, opening the risk that Congress will not support such action, an outcome similar to that seen in the British Parliament last week.
The delay has eased the market's nervousness to some extent which has reduced the safe haven demand for the yen.
"We see an improvement in investor risk sentiment on Syria. Also the China PMI data is a key driver as it is helping ease investor pessimism over the China growth outlook," said Lee Hardman, currency economist at Bank of Tokyo Mitsubishi.
"All this is encouraging some renewed risk seeking behavior by investors this week," he said adding that he expects the dollar to test the 100 yen level in coming sessions.
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Commodity currencies, like the Australian dollar were better bid thanks to the encouraging Chinese data, which showed factory activity expanded at the fastest pace in more than a year in August.
The Aussie was up 0.9 percent at $0.8981.
The latest Commodity Futures Trading Commission data showed currency speculators increased their bets in favor of the dollar and were bullish on the euro.
The euro was steady at $1.3215 against the dollar.
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Euro zone survey data released on Monday indicated that factory activity rose at its fastest pace in more than two years in August.