North Korea's announcement that it had successfully conducted an underground nuclear test kept the yen on the back foot on Monday, even after it hit an eight-month low against the dollar.
The dollar had also been supported by expectations that US interest rates are unlikely to fall soon due to signs of strength in the jobs market. Data on Friday showed the US unemployment rate matched a five-year-low in September.
But immediate market attention was dominated by North Korea. South Korea's military ordered army units to step up their state of alert after Pyongyang's announcement, made as Japanese Prime Minister Shinzo Abe arrived in Seoul.
Japan's proximity to North Korea and reliance on exports to Asia means the yen tends to be hurt by tensions over the reclusive Stalinist country.
"One expects North Korean posturing, but to undertake a nuclear test maybe is somewhat extreme and a major escalation in tension. It makes people wary about dismissing this too quickly," ING head of FX strategy Chris Turner said.
By 1142 GMT, the dollar was trading at 119.05 yen, off an earlier eight-month high of 119.29 yen. Mellon Bank head of foreign exchange research Ian Gunner said a break of key resistance levels around the 119.40 area could open the door for a move to 120 levels.
The euro climbed as high as 150.29 yen, heading towards last week's one-month high around 150.45 yen but still some way off August's record 150.78 yen, according to Reuters data.
Despite tensions over North Korea, RBC said its risk aversion thermometer stood at minus 4.2 points, remaining "strongly in risk-seeking territory".
The euro firmed slightly on the day at $1.2607, after hitting a 2-1/2 month low of $1.2571 on Friday after the US non-farm payrolls.
The data showed upward revisions to past US employment growth - a massive 810,000 in the year to March - and left the labour market looking tighter than previously thought.
That challenged speculation the Federal Reserve had definitely finished raising interest rates and could start cutting them from 5.25 percent sooner rather than later.
The euro was unmoved however by the Sentix index of investor sentiment for the euro area, which was unchanged in October at 20.1.
Minutes from the last Federal Open Market Committee meeting, due on Wednesday, will be scanned to see if the central bank highlights inflation risks or slowing growth as markets mull the next move on rates.
"We think the Fed minutes may still probably highlight short-term concerns on inflation, even though they are on hold," Mansoor Mohi-uddin, Managing Director of forex strategy at UBS, said.
Trading volumes were light with Japan and the United States on holiday on Monday. US stock and foreign exchange markets remain open.
International Monetary Market speculators sharply increased their bets against the yen in the week to October 3, pushing weekly net short positions to the largest since at least 2000, data on Friday showed.
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