The resurgent U.S. dollar has trumped most major currencies in its march higher, not least the Japanese yen, whose recent slide against the greenback is raising policymakers' eyebrows.
Dollar-yen spiked to a six-year high this week, touching a high of 106.46 on Tuesday. The move triggered warnings by Finance Minister Taro Aso and Economics Minister Akira Amari, who cautioned that further sharp declines in the currency are not desirable.
The yen's near-term outlook hinges on the direction of the U.S. dollar, say analysts, who expect further downside in the Japanese currency.
"The U.S. dollar index is approaching early 2013 highs, a break of which would see it trade at its highest since 2010. Japan has perhaps been the biggest beneficiary of this," said Stan Shamu, market strategist at IG.
The greenback has stormed higher on a strengthening American economy and the prospect of higher U.S. interest rates as the Federal Reserve unwinds its easy monetary policy.
Odds are rising that the Fed could make an important change to its policy statement at its meeting next week which markets will see as a cue that rate hikes are coming sooner than expected.
"The U.S. is recovering – the question is the pace, and not the direction," added Callum Henderson, global head of FX research at Standard Chartered.
By contrast, the yen – which has hovered around the 102 level against the dollar for much of this year – saw a pronounced sell-off in the last month, falling over 4 percent against the greenback.
According to Emma Lawson, senior currency strategist at the National Australia Bank, the yen has also been hampered by soft economic data and increasing chatter than the Bank of Japan (BoJ) may step in with more stimulus to support the economy.