The dollar rose on Monday, hitting a two-week high against the yen as volatility in global equity and commodity markets prompted investors to switch from riskier assets into cash.
The greenback advanced more than 1 percent against the yen at one point, with the Japanese currency extending losses made late last week after the Bank of Japan said it was in no hurry to raise rates from near zero.
European stocks were sharply lower, while metals prices took a pummelling on the back of losses incurred last week. But the dollar rally ran into resistance at key technical levels against the euro and yen, with the single currency also boosted after some European officials appeared unconcerned about its recent strength.
"Once we got down towards the $1.27 mark (euro/dollar) things got a little bit sticky. We seem now to be stuck in a bit of a trading range in what is seemingly relatively light liquidity," Rabobank currency strategist Jeremy Stretch said.
"The market still seems relatively overstretched in terms of dollar short positions pretty much across the board,...if commodity prices continue to ease that will be a trigger point," he added.
By 1147 GMT the dollar was up 0.6 percent on the day at 112.40 yen after hitting is strongest since May 5 at 112.93 yen.
The euro was flat at $1.2766 with strong chart support at $1.27 helping to stem losses.
The Australian dollar, which often moves in tandem with commodity prices, was the worst performer, sliding 1 percent to $0.7508. The dollar erased early gains against the euro as some of the currency bloc's finance officials appeared sanguine about the single currency's recent run higher and European Central Bank President Jean-Claude Trichet said the central bank was very vigilant on inflation.
The Dutch and Greek finance ministers, at separate events, said they were not concerned about the level of the euro, which hit a one-year high last week near $1.30.
However, French Finance Minister Thierry Breton said discussions between eurozone finance ministers and the European Central Bank were "frank".
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