The dollar slipped in Asia Thursday as volatility in Chinese stocks fueled speculation that global investors may trim risk positions, including bets that the yen will weaken.
The dollar was trading at 121.52 yen midafternoon, down from 121.58 yen late Wednesday in Tokyo. The euro remained unchanged at US$1.3436.
But Tokyo traders said the yen will stay weak, shackled by Japan's low interest rates. If U.S. data due Friday show stronger-than-expected jobs growth, the dollar could top this year's high of 122.20 yen, they said.
In Thursday's morning session, the dollar moved slightly lower against the yen after Wednesday's declines in the Chinese market, which prompted some players to unwind so-called yen-carry trades.
Yen-carry trades involve borrowing yen at Japan's low interest rates and investing funds in higher-yielding assets elsewhere. Reversing those trades would strengthen the Japanese currency.
After a round of trading, the dollar stayed in a narrow range in Thursday afternoon in Asia. Shanghai's benchmark stock index rebounded modestly Thursday.
The dollar was mostly lower against regional currencies, slipping to 8,830 Indonesian rupiah from 8,840 the previous day, 927.6 South Korean won from 931.0, and to 46.145 Philippine peso from 46.225.