Inflation in Japan slowed more than expected in August, to rise 1.1% from a year earlier compared with a 1.3% rise the previous month and economists’ forecast for a 1.2% rise.
Meanwhile, there is speculation that the Japanese government will push ahead with reforms to the nation’s pension fund and these measures could weaken the yen.
From a low of 108.46 yen, the dollar rose back above the key 109 yen level to 109.10. The dollar has gained nearly five percent this month, touching a six-year high of 109.44 yen last Friday.
The dollar is expected to maintain its bullish bias against the yen due to the diverging monetary policies of the Federal Reserve and the Bank of Japan. The yen is headed for its biggest monthly drop in 1 1/2 years.
The euro slid to 1.2730 after having bounced off a 22-month low of 1.2698 hit on Thursday. The euro tumbled against the dollar largely due to comments from European Central Bank President Mario Draghi who said that the central bank could use additional unconventional policy measures if its inflation target is under threat.
There are limited data releases from Europe today so the focus will be on the US, with the final reading of GDP figures due.