The dollar edged up against the yen on Friday on light bargain hunting following two sessions of losses, with markets slowly getting into gear after the Christmas holiday.
Market participants expected it would still take a bit of time for business to resume in full swing, with key markets in the region such Australia, Hong Kong and Singapore closed on Friday. The U.K. market will remain closed on Friday although New York will be open.
After a dip to 120.00 yen, the dollar was up 0.2 percent at 120.31 yen, crawling back towards the week's high of 120.80 hit on Tuesday.
A break above that peak would put the greenback in sight of a 7-1/2 year high of 121.860 scaled earlier in the month.
"That the recent drop by the dollar was contained shows that risk sentiment continues to improve. There is no change to our view that the yen will continue to weaken as the recovery in U.S. economic fundamentals, which is at the root of risk appetite, continues to gather pace," said Junichi Ishikawa, a market analyst at IG Securities in Tokyo.
The dollar also took back some ground against the euro after two days on the retreat.