The dollar crept up from 10-week lows against the yen on Friday, but its rise was seen capped by lingering geopolitical concerns and ahead of a blitz of crucial events and economic indicators next week.
Attacks in Iraq and Turkey and less-than-stellar US economic figures weighed on the dollar in the morning, while light bargain-hunting helped to lift the currency against the euro from 2-1/2 week lows hit on Thursday.
"Given the supply and demand outlook (for the dollar/yen), concerns over the transition of power in Iraq and speculation about geopolitical risks leading up to July 4 (US Independence Day), the dollar will remain top-heavy for the next week or so," said Takeshi Iba, chief forex dealer at Bank of Tokyo-Mitsubishi.
The dollar was fetching 107.40 yen compared with 107.14 in late US trade, where it skidded to a low of 107.02 yen.
Some traders said the market was starting to worry that the Japanese authorities might intervene in the market should the yen strengthen further.
"I don't think they'll step in yet, but further falls (in the dollar) will make players more nervous," said Mitsuo Imaizumi, deputy general manager of the international bond and forex department at Daiwa Securities SMBC.
The US currency was at $1.2151 per euro, a touch firmer than in late US trade but still within sight of 2-1/2 week lows around $1.22.
The single currency was trading at 130.50 yen, slightly firmer than late New York levels.
Key events next week include the Federal Reserve's interest rate-setting meeting on Tuesday and Wednesday, the Bank of Japan's tankan survey of business sentiment on Thursday, and US non-farm payrolls data for June on Friday.
Currency volatility came as a surprise to some analysts who had been expecting a week of quiet, range-bound trading in the lead-up to next week's indicators. The yen has gained more than two percent on the dollar since Monday.
"I wasn't expecting the dollar to fall this much (against the yen)," said Daiwa's Imaizumi.
"It's very possible that it could fall under 107 yen."
But Tokyo-Mitsubishi's Iba, who said the dollar could fall closer to 106 in the near term, said the US currency would likely find support from importers and Japanese retail investors looking at interest rate differentials to buy US securities.
"While there may be a reaction to excessive market moves, the dollar over the long run will find support because there is no doubt about the strength of the US economy," Iba said.
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