TOKYO: The dollar rallied in Asia on Tuesday amid lingering questions over the US Federal Reserve's future policy plans as the yen returned to its weakening trend.
After briefly jumping past the 102 yen level, the greenback slipped to 101.93 yen by mid-afternoon. It bought 101.09 yen in Europe late Monday.
The dollar rose past 103 yen this month to hit its highest level since October 2008 on the Bank of Japan's aggressive monetary easing and robust US economic data. Easing tends to push down a national currency.
Currency traders were keeping a close eye on Tokyo's Nikkei 225 stock index which is closely linked to yen trading, with Japanese exporters benefiting from a weaker unit as it makes them more competitive overseas.
Comments on Tuesday from Japan's economy minister, Akira Amari, which suggested the Tokyo stock market's recent turbulence was likely temporary, helped boost shares and push down the yen, traders said.
"After days of abnormal markets, investors were looking for some clues to change the mood," a senior dealer at a major Tokyo bank told Dow Jones Newswires.
On Monday, the minutes of the Bank of Japan's last policy meeting showed some board members had doubts about the ambitious two-year timeline for the central bank's inflation target, aimed at dragging the country out of years of falling prices which have crimped private spending and business investment.
The bank's policies -- which include aggressive easing and setting an inflation target -- have been a major driver behind the weaker yen.
"The bottom line of course is that they are pushing on with their program to reflate the economy," National Australia Bank said of the BoJ.
On Tuesday, the euro weakened against the dollar at $1.2922 from $1.2928, while it was stronger at 131.77 yen from 130.69 yen in Europe.
The embattled single European currency has gained a measure of support from strong data on the German economy published Friday, with markets eyeing an Italian bond auction and Spanish economic figures later in the day.
Dollar trade has been influenced by differing interpretations over comments from US Federal Reserve chairman Ben Bernanke last week, although dealers generally saw him as saying the Fed needed to see a few months' more data before it would weigh reining in its bond-purchase programme.
The dollar strengthened against other Asia-Pacific currencies.
It rose to Sg$1.2646 from Sg$1.2645 the previous day, to 9,825 Indonesian rupiah from 9,798 rupiah, to 1,126.88 South Korean won from 1,123.38 won and to 29.92 Thai baht from 29.91 baht.
The greenback also firmed to 41.85 Philippine pesos from 41.63 pesos, to 55.74 Indian rupees from 55.69 rupees and to Tw$29.91 from Tw$29.87.
The Australian dollar slipped to 96.49 US cents from 97.24 cents while the Chinese yuan changed hands at 16.65 yen against 16.47 yen.
