The yen dropped to a one-month low versus the dollar Tuesday on expectations that Japanese investors will resume selling the currency as they park money overseas in the fiscal year just started.
Japanese mutual funds and corporations often repatriate overseas profits before book closing at the end of March, buoying the yen. Traders said that with the new fiscal year under way, speculation was growing that these flows will reverse and the yen come under renewed pressure as Japanese investors resume purchases of higher-yielding overseas assets.
"With the fiscal year having finished, the repatriation flows have dissipated, and now there's the expectation that Japanese investors will resume overseas investments and selling yen," said Camilla Sutton, currency strategist at Scotia Capital in Toronto.
Elsewhere, the dollar posted solid gains against the Swiss franc, but was trading in a tight range versus the euro as many traders waited for a U.S. jobs report at the end of the week, the most closely followed barometer of the labor market.
The dollar was up against the yen, euro and Swiss franc. The euro was up versus the yen, near a session high of 158.82, a level last seen on Feb. 27 before investors rushed to buy back the Japanese currency and unwind carry trades as global equity markets tumbled.
The Australian dollar retreated from a decade high against the dollar ahead of an interest rate decision, with investors betting the Reserve Bank of Australia will hike rates to 6.5%.
Sterling slipped against the dollar ahead of a rate decision by the Bank of England on Thursday. Financial markets are pricing in slightly less than an even money chance that the bank will raise rates from 5.25%.