The dollar gained against the yen on Monday, rising from a record low plumbed late last week, as investors covered dollar short positions wary that Tokyo could step into the market and with a US bank detected buying. Underscoring extreme nervousness in the market, the dollar briefly spiked to 1-1/2 week high of 77.23, but quickly pared some of those gains, with traders citing talk that the jump was triggered by bids from a US bank.
The dollar last traded at 76.78 yen, off a record low around 75.94 hit on Friday. Traders talked of hefty sell-stops below 75.00, a level Japanese authorities are likely to keep the yen well away from. The yen is up 5.5 percent and the Swissy 16 percent this year, with their strength spurring authorities in those countries to look to curb gains.
The Bank of Japan will consider easing monetary policy further, possibly at an emergency meeting before next month's rate review, if further rises in the yen push down Tokyo stock prices enough to hit business sentiment, sources said. The dollar was last at 0.7860 francs, off Friday's session high around 0.7959. As traders refrained from buying safe-haven currencies on intervention fears, gold surged 1.4 percent to an all-time high, setting its 10th record so far this month.
The euro was broadly lower, shedding 0.6 percent to 1.1285 francs compared with Friday's high of 1.1319. after Germany strongly rejected mounting calls for the eurozone to issue joint debt to help tackle the crisis. But it signalled it was open for the bloc to move towards a form of fiscal union.
Against the dollar, the single currency was down 0.2 percent at $1.4364, having found the going tough above $1.4400. Traders said there are bids seen in the $1.4340-45 area, a level that is likely to provide first support. "We still think it will take a lot to test the upper edge of what is now an effective $1.41-1.45 range, with offers likely to be thick ahead of $1.45," BNP Paribas analysts wrote in a note.
They said they expected euro/dollar to move back to the low-end of the range ahead of Federal Reserve Chief Ben Bernanke's speech at Jackson Hole, Wyoming, on Friday, or on any eurozone data this week that would increase global recession worries. The Australian dollar down 0.1 percent at $1.0385, below last week's peak of $1.0601.