The yen rose to eight-week highs against the dollar on Monday and seven-week peaks versus the euro on the back of strong Tokyo equities gains and expectations for a firming interest rate picture in Japan.
Gains of nearly two percent in the Nikkei share average boosted demand for the Japanese currency and lifted the yen as high as 108.26 per dollar in the European session, its strongest since late April.
Dealers also watched Japanese government bonds (JGBs). The benchmark 10-year yield softened on Monday but hit its highest level in nearly four years last week and has been a key focus of debate about where Japanese interest rates are headed.
"We are seeing a continued correlation between the yen and equity markets. Generally sentiment towards the yen is improving and there is less concern about premature rate hikes or a slowdown in China," said Mitul Kotecha, head of global foreign exchange research at Calyon in London.
At 0945 GMT, the greenback traded down a third of a percent on the day at 108.39 yen and the euro remained 3/4 of a percent down at 131.07 yen, near the day's low 130.97.
Elsewhere, the greenback fought to recover ground it lost on Friday after news of a larger than expected US current account deficit saw it drop about a cent against the euro.
On Monday, the dollar traded a third of a percent firmer against the euro at $1.2092, remaining stuck in recent ranges, and it also rose nearly half a percent on the day against the Swiss franc.
Markets turned their focus to central bank speakers in the face of a fairly quiet data calendar.
US Federal Reserve Board Governor Ben Bernanke appears at 1700 GMT.
Markets widely expect the Fed to increase interest rates a quarter point at its policy meeting on June 29-30, but the pace of rate rises afterward remains uncertain.
Higher US interest rates were likely to lure more foreign capital, and ease concerns about the soaring US current account deficit, which widened to a record $144.9 billion in the first quarter, exceeding economists' forecasts.
For further clues on the current state of the US economy, the market may have to wait for data due later this week, when durable goods orders, new and existing home sales and consumer sentiment will be released.