The unit drifted lower to $1.3601 in Tokyo morning trade from $1.3611 in New York late Friday, after rising as high as 1.3648. The single European currency fetched 112.47 yen compared to 112.43.
In rangebound trading, the dollar edged up to 82.69 yen from 82.60 yen.
The euro fell on profit-taking orders by Asian hedge funds and account-settling Japanese exporters, FXOnline Japan senior strategist Soichiro Mori told Dow Jones Newswires.
The single currency enjoyed a sizable gain on Friday as German business confidence hit a record high according to the Ifo institute -- good news for the 17-nation eurozone as it grapples with a deep-seated sovereign debt crisis.
Ifo's closely tracked reading of business sentiment climbed to 110.3 points in January from 109.8 points in December, its eighth consecutive increase and its second straight record high since the country's reunification in 1990.
"Amid receding worries about the eurozone sovereign debt problem in the financial market for now, the Ifo data gave additional support to the euro as it confirmed the current strength of the economy," said Sumino Kamei, senior analyst at the Bank of Tokyo-Mitsubishi UFJ.
A Wall Street Journal interview with European Central Bank President Jean-Claude Trichet, in which he signaled he will not let economic weakness on Europe's troubled fringe delay ECB interest-rate increases if needed, also boosted sentiment in early Asian trade.
The market is looking for fresh trading cues from major US events later this week, including the Federal Reserve's two-day policy meeting starting Tuesday as well as consumer confidence and gross domestic product data.
The dollar could get support if the statement from the FOMC meeting is more hawkish than its previous statement, a senior dealer at a major Japanese bank said.
"Some of the more hawkish FOMC members such as Philadelphia Fed President Charles Plosser will exercise their voting rights at the upcoming FOMC meeting," the dealer said.
"It's worth paying attention to whether the tone of the FOMC's statement suggests that there are more inflation worries," as increased worries will help boost US Treasury yields and spur dollar purchases, he said.
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