The yen fell against the dollar on Tuesday, taking its cue from a slide in Japanese share prices in a market that otherwise dithered ahead of comments from US Federal Reserve Chairman Alan Greenspan later in the day.
The bellwether Nikkei stock average ended trade down 1.55 percent, raising concerns that fund inflows to Tokyo shares may slow or come to a halt.
"Foreign investors have bought Japanese shares considerably this year, so they may decide it is time to sell," said a trader at a Japanese trust bank. The dollar bought 108.60 yen, up from around 108.25 in late New York trade.
The euro was at around $1.2450, little changed from late US levels and not far off a 4-1/2 month high around $1.2461 hit on Monday.
The dollar has come under pressure recently as US data hinted at a possible slowdown in the US economy.
A disappointing reading for US payrolls and industrial production earlier this month helped to knock US share prices to a two-month low on Monday.
On Friday, weaker-than-expected consumer price data reinforced the market's view that the Fed's monetary tightening would be moderate.
Many market players were looking to Greenspan's semi-annual monetary report to the US Congress on Tuesday and Wednesday.
Traders said that Greenspan would not likely alter the Fed's policy of a "measured" rate rise given recent tepid data.
"We are looking at Greenspan's speech to provide a direction to the market," said Naomi Fink, senior currency analyst at BNP Paribas.
"I don't think the Fed has any new material to alter its perception (on rates)," she added.
Since the Fed raised interest rates by 25 basis points last month from a 46-year low of 1 percent, the central bank has repeatedly signaled that any future increases would be gradual.
"Given his track record, Greenspan is unlikely to give any clear signals," said Mitsuru Sahara, vice president of forex dealing at UFJ Bank.
"I expect the dollar/yen to remain in a range between 107.50 and 109.50," he said.
Some traders were curious to see what Greenspan had to say about the spike in oil prices, which some blame for sluggish share prices world-wide.
Crude futures have risen close to $42 per barrel this week, near the recent peak hit in early June.
Some traders were concerned that a further rise in oil prices was the last thing the US economy needed at a time when tax cuts were waning as a means for providing an economic boost.
Still, others said that recent signs of a slowdown in the US economy were merely signals of a healthy adjustment.
"We are seeing an adjustment right now. But I'm bullish about the US economy, as corporate profits remain good," said Seiya Nakajima, chief economist at Itochu Corp.