The yen strengthened against the dollar on Friday after the Bank of Japan left monetary policy unchanged, disappointing speculators who had bet the central bank would expand its already huge stimulus programme.
After the European Central Bank last week signalled it would ease policy further, China followed a day later with a fifth Chinese rate cut this year. This week saw more easing from Sweden's Riksbank, and expectations grew that the BoJ would follow suit, particularly given a run of downbeat Japanese data.
Japan's central bank, however, appeared confident that a tight job market would lift wages and consumption.
Earlier in the week, the US Federal Reserve also kept its policy unchanged, but it signalled that it may raise rates as soon as December. The dollar climbed to a 2 1/2-month high against a basket of major currencies, putting it on track for its best month since July
Attention now turns to US inflation data. The Fed's preferred measure of inflation - core personal consumption expenditure price index - is expected to show prices rising by 0.2 percent in September, the highest rise since April.
That is a not a significant jump, but if the trend continues it would suggest that some inflationary pressure is finally reappearing, analysts said.
Before the data, the dollar was a touch lower across the board, and fell to as low as 120.29 yen after Japan's rate decision, before recovering a little to 120.715, still down a third of a percent on the day.
"We don't rule out further BoJ easing next year, but for now dollar/yen should be largely driven by dollar side of the equation, with the cross being very sensitive to the Fed's rate outlook," said ING currency strategist Petr Krpata in London.
At a news conference following the BoJ decision, Governor Haruhiko Kuroda said inflation would bounce back after the base effects of a plunge in the oil price dissipate. A two-year inflation target of 2 percent was still reasonable, he said.
"The BoJ will probably wait to see whether the Fed may move in December, before deciding to ease further," said Hiromichi Shirakawa, chief economist at Credit Suisse Securities in Japan.
The euro was 0.3 percent up on the day at $1.1007, having been boosted by a slight improvement in euro zone prices, especially core inflation.
But analysts from Goldman Sachs said in a note that an "interlude" since March, when the Fed had been more dovish, was now over and that the dollar was therefore set to strengthen significantly across the board.
"With the ECB likely to ease at its December meeting, 2015 could yet bring true central bank divergence," they wrote. "We expect around a 20 percent trade-weighted appreciation in the dollar through to end-2017."