The dollar was largely flat against the yen in Asia Thursday on exporter selling, but traders expect the Japanese unit to fall further due to the continued popularity of the yen-carry trade.
The U.S. dollar was trading at 123.65 yen midafternoon, up from 123.61 yen late Wednesday in New York. The euro fell to US$1.3395 from US$1.3400.
Yen-carry trades involve borrowing yen at Japan's low interest rates and investing funds in higher-yielding assets elsewhere such as New Zealand and Australia.
Selling by Japanese exporters capped the dollar's rise at 123.70 yen during the Asian trading session. Other players, wary about pushing the greenback beyond current levels, stayed on the sidelines, dealers said.
The Japanese currency is likely to remain range-bound between 123.20 yen and 123.80 yen to the dollar this week amid a lack of fresh trading material. But traders say it will start dropping again when Japanese exporters complete their sales of the dollar.
"Once Japanese exporters' sell orders around the low-124 yen levels are cleared, Japanese importers are going to buy again and the dollar is likely to rise further (against the yen)," said Mitsuru Sahara, a senior dealer at Bank of Tokyo-Mitsubishi UFJ.
The dollar was mostly higher against other Asian currencies, rising to 3.4465 Malaysian ringgit from 3.4295, 8,980 Indonesian rupiah from 8,945, and to 46.045 Philippine pesos from 45.875.