The dollar neared a six-week high against the yen first seen late last week after a strong reading on U.S. jobs creation dashed investors' expectations of a near-term interest rate cut.
Demand for dollars has climbed since a government report Friday showed the U.S. economy added 180,000 jobs last month, well above economists' forecasts, while the jobless rate fell.
That eased concern about any slump in manufacturing and suggested the Federal Reserve would not need to cut rates in coming months to boost a slowing economy. A gain in U.S. stocks and a 3.7% slide in oil prices on Monday also helped support the dollar, strategists said.
"The dollar is managing to hold, and even extend, some of Friday's gains," said Andrew Busch, global foreign exchange strategist at BMO Capital Markets in Chicago. "The jobs data took off some of the pressure for a rate cut and is also giving a boost to equities."
The dollar traded just below a post-jobs report peak of 119.39 yen on Friday, according to electronic trading platform EBS, its highest since Feb. 27.
Volumes were lower, with most European markets closed for Easter, and the U.S. economic calendar was bare, traders said.
The next key event for the market will be Wednesday's release of minutes from the Fed's March monetary policy meeting. The Fed left benchmark overnight rates at 5.25% but dropped a phrase from its statement pointing to further policy tightening ahead. Any sign officials remain sensitive to inflation would likely boost the dollar, analysts said.
Clouds Ahead?
Longer term, though, some analysts say the dollar will come under renewed pressure as rising interest rates elsewhere continue to trim its yield advantage over other currencies.
The European Central Bank is expected to hold euro zone rates at 3.75% on Thursday but is seen preparing the market for a quarter-point rise at its next meeting in June.
Dollar gains versus the yen may also be capped ahead of a meeting of Group of Seven developed nations finance ministers on Friday, some analysts said.
But UBS senior currency strategist Daniel Katzive said yen weakness is likely to resume after the meeting ends.
"We are not looking for market-moving developments from the meeting and, with carry trades doing well, we would be cautious about trading our medium term bullish yen views," he said.
Traders have in recent weeks rebuilt carry trades that involve borrowing yen cheaply to fund purchases of higher-yielding currencies and assets.
G7 officials in the past have said the resulting yen weakness runs counter to Japan's economic recovery and warned that investors could get burned on such one-way currency bets.
The Bank of Japan will conclude a monetary policy meeting on Tuesday. Few expect any change to Japan's 0.50% rates but investors will be looking for signs of a possible rate hike
in May or June.