The dollar took a breather on Friday after a brisk week-long rally on expectations of higher US interest rates that pushed it to two-year highs above the technically and psychologically crucial 115 yen level.
A day after reaching that milestone, the market shifted down a gear before the weekend and ahead of US inflation data that could further fuel expectations that the Federal Reserve will keep raising interest rates.
The dollar has erased its losses incurred against the yen after a watershed Group of Seven statement at the forum's Dubai meeting two years ago called for flexible exchange rates to correct global imbalances.
Analysts said this reflected a shift in the market's focus to interest rate differentials, from the United States' fiscal and current account deficits.
"Last night we saw the dollar rally on news of a smaller-than-expected US trade deficit, but that was still the third largest on record," said Kikuko Takeda, currency analyst at Bank of Tokyo Mitsubishi.
"Instead, everyone focused on higher prices. That is very symbolic of the change in the market's theme over the last two years," she added. The dollar was trading around 114.45 yen, little changed from its levels late on Thursday, when it touched a two-year high of 115.10 yen.
Takeda said that dollar bulls in the market were not done, although it may take a while for the currency to establish a firm foothold above 115 yen and head towards 120 yen.
The dollar hovered just over a cent below Thursday's one-week highs against the euro, trading at around $1.2035 to the single European currency.
"The question right now is whether there will be more unwinding of long positions in the dollar, particularly as we approach the weekend," said Fumihiko Kawano, forex manager at Nomura Securities.
Economists polled by Reuters, on average, forecast a 0.9 percent rise in the September CPI compared with a 0.5 percent increase in August.