The yen fell to a fresh 4-1/2-year low against the dollar as low Japanese interest rates continued to weigh on the currency.
But the dollar edged lower against the euro and sterling, tracking a slide in U.S. bond yields, undermining the appeal of dollar-denominated assets.
The yen has declined across the board since Bank of Japan governor Toshihiko Fukui last week all but doused expectations that the Bank of Japan would raise interest rates in July. That
led investors to continue dumping the yen for currencies such as the euro, which is expected to benefit from two more rates rises this year by the European Central Bank.
"Dollar/yen remains a one-way ticket, euro/yen is setting new highs, and the wide interest rate gap means this will remain a theme throughout the summer," said Greg Salvaggio, senior currency strategist at Tempus Consulting in Washington.
The dollar has not matched its advance against the yen with similar gains versus the euro, which rose as high as $1.3418 in tandem with falling U.S. bond yields, before
easing to $1.3408 -- still up almost 0.2% from Friday.
The dollar has rallied since early May, tracking a rise in Treasury bond yields to 5-year highs, and partly driven by a series of solid U.S. economic data that has led investors to
erase expectations that the Federal Reserve will cut interest rates this year.
Markets will look to European Central Bank President Jean-Claude Trichet, who speaks Monday afternoon in Montreal, for clues about the timing of ECB rate moves.
Elsewhere, speculation that the Reserve Bank of New Zealand intervened on Monday to weaken the New Zealand dollar did little to sap the strength of the highest-yielder among G10
currencies.