The dollar fell on profit-taking against the yen in Asia Tuesday after posting recent gains on expectations the Japanese central bank will announce a fresh set of monetary easing measures. The greenback had been bought since the Federal Reserve announced Thursday a third round of bond-buying, or quantitative easing (QE3), that stoked speculation the Bank of Japan would follow suit at the end of a two-day meeting Wednesday.
The dollar eased to 78.57 yen from 78.70 yen late Monday in New York.
While a Fed plan to flood markets with dollars would usually have sent the greenback plunging, the unit was supported by expectations of BoJ loosening as well as warnings from Tokyo of market intervention to weaken the Japanese currency.
A poor reading on a key index of manufacturing in New York — the second straight monthly contraction — also kept a cloud over the dollar.
The euro bought $1.3109 compared with $1.3114, while trading at 103.00 yen, from 103.22 yen.
Masafumi Yamamoto, chief forex strategist at Barclays in Tokyo, told Dow Jones Newswires that the pressure on the dollar may grow if the BoJ refrains from taking additional easing steps at its two-day policy board meeting.
Markets in Japan were closed for a public holiday on Monday.
