The dollar fell on Thursday on growing doubt that Group of Seven (G7) finance leaders will take a stand against the currency's weakness when they meet next month.
European officials' concerns about the euro's rise were no longer having the sort of impact they did last week, when the dollar bounced by nearly five percent, leaving the US currency back within sight of life lows.
"European officials started screaming about the euro's strength, but looking at what happened after the G7 in Dubai, I don't think they want to mention anything explicitly this time," said Toru Umemoto, currency strategist at Morgan Stanley in Tokyo.
At the Dubai meeting, G7 ministers called for more flexible exchange rates, a call the market perceived was aimed at Asia but which, in the weeks that followed, drove the dollar down against the euro.
"It was a huge political mistake by European officials," said Umemoto.
Dealers said choppy trade would likely continue as the market sought hints about whether, if at all, policymakers from the G7 industrial countries nations would express a concerted view on the dollar's weakness at their meeting in Florida on February 6-7.
The euro has moved wildly against the dollar, dipping to a one-month low of $1.2350 late last week, before coming back to around $1.2670. That is within two percent of its life highs near $1.29 set last week.
The dollar weakened against the yen to around 106.85 yen barely one percent off last week's three-year lows around 105.70 yen.
Zembei Mizoguchi, vice finance minister for international affairs, told reporters on Thursday that the Japanese authorities were ready to step in and take action if foreign exchange rates overshoot.
Japanese Finance Minister Sadakazu Tanigaki said he had met Bank of Japan Governor Toshihiko Fukui earlier in the day. "I asked for his assistance at what will be my first G7 as a minister," Tanigaki told reporters. He declined to comment on what was discussed.
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