The yen rose and was on track for its fourth consecutive monthly advance against the dollar on Tuesday, its longest winning streak in 19 months, as investors shrugged off Japan's latest easing move.
Demand for the safe-haven currency rose in the past month as U.S. Treasury yields tumbled amid mounting signs the economic recovery in the United States was faltering.
The rapid advance, which pushed the yen to a 15-year high this month, prompted Japanese authorities to announce measures on Monday to curb the yen's strength to protect the country's exports.
Traders and analysts saw the central bank's moves as a symbolic gesture that will do little to halt the climb. They said that short of direct intervention in the foreign exchange markets, the yen is bound to test its all-time high of 79.75 yen set in April 1995, according to Reuters data.
"The policy action by the BoJ isn't going to change the market's mood. It would probably take intervention to shake things up a bit," said Vassili Serebriakov, currency strategist at Wells Fargo in New York.
But Serebriakov and other analysts cautioned that direct intervention may have limited impact. "We're not even sure that (intervention) would cause a sustained reversal of yen strength," he said.
Japan last sold yen in the markets to weaken it in March 2004, with mixed results.
In late afternoon trading, the dollar was down 0.8 percent at 83.96 yen, not far from its 15-year low of 83.58 set on electronic trading platform EBS last week. The euro fell 0.6 percent to 106.50 yen.
"The yen has a little further to go," said Daniel Katzive, currency strategist at Credit Suisse in New York. "We think dollar/yen can get down to 82 in the near term."
He said that with global benchmarks yields near or at record lows, Japanese investors would need more incentive to take risk in foreign markets, helping sustain demand for the yen.
Japanese Finance Minister Yoshihiko Noda repeated on Tuesday that the government would take decisive action on currencies -- usually seen as code for intervention -- when necessary.
The dollar has fallen almost 3 percent against the yen this month and is down more than 9 percent this year.
Traders say Japanese authorities are expected to buy the dollar against the yen if the dollar slides 3-4 yen in one day.
The yen could also face potential buyback pressure in cross trades such as euro/yen and Aussie/yen, which have attracted some interest because of their larger yield differentials.
U.S. economic data this week, including Friday's nonfarm payrolls report, could push the yen higher if they show further deterioration in the economy and weigh on bond yields, analysts said.
The dollar did not react to the release of minutes of the Federal Reserve's August meeting as it only reinforced the view the Fed is ready to provide additional policy stimulus if the economic outlook weakens.
Against the dollar, the euro rose 0.2 percent to $1.2684, but it slumped to a record low 1.2850 francs on electronic trading platform EBS.