Asian shares rose for a fifth straight day on Friday as investor confidence slowly returns after a sharp sell-off earlier in the month, while the dollar continued its descent, hitting a three-year low against a basket of major currencies.
U.S. debt yields rose near multi-year highs. Two-year note yields hit a 9 1/2-year high as bond prices fell on Federal Reserve officials' signaling that recent volatility in U.S. stocks would not stop them raising interest rates in March.
European shares are expected to rise 0.3 to 0.4 percent at the opening, according to spread-betters.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4 percent, though many Asian markets were closed on Friday for the Lunar New year.
Japan's Nikkei rose 1.2 percent, with investors relieved to see the government appoint Bank of Japan Governor Haruhiko Kuroda for another term, suggesting the central bank will be in no rush to dial back its massive stimulus program.
Measured by the MSCI's broadest gauge of the world's stocks covering 47 markets, global shares have now reclaimed more than half of the 10.7 percent plunge from a record intraday high on Jan. 29 to a four-month intraday low a week ago.
Investors have been reassured by a fall in the Wall Street Vix index, the "fear gauge" that measures the one-month implied volatility of U.S. stocks.
The index dropped below 20 for the first time since its spike to 2 1/2-year high of 50.3 last week, a jump that caused massive losses among investors who bet equity markets would be stable on a combination of solid economic growth and moderate inflation.
The Vix futures fell back to more normal patterns, from the past several days of so-called backwardation, in which the front-month contract becomes the most expensive.
The return of a more usual curve suggested that the loss-cutting and position unwinding of "volatility short" strategies had run its course for now, easing investors' nerves.
"I've said markets will be unstable until February, and that February will offer a good buying opportunity," said Eiji Kinouchi, chief technical analyst at Daiwa Securities, noting that U.S investors were likely to book profits in January to take advantage of lower tax on capital gains.
The selling appears to have run its course and the fall in volatilities, both implied and actual, is likely to prompt investors to return to stocks, he said.
The U.S. dollar, on the other hand, slipped below its January low against a basket of major currencies to reach its lowest since late 2014.
The dollar index fell to as low as 88.37, and was on course to lose over 2 percent for the week, its biggest such loss in two years.
There is no strong consensus yet on what is driving the dollar's persistent weakness, especially in light of rising yields. Some say it simply reflects a return of risk appetite and a shift to higher-yielding currencies, including many emerging market ones.
But others cite concerns that Washington might pursue a weak dollar strategy as well as talk that foreign central banks may be reallocating their reserves out of the dollar.
There are also worries President Donald Trump's tax cuts and fiscal spending could stoke inflation and erode the value of the dollar.
"His protectionist policies could also fan inflation. Markets appear to have calmed down for now but fundamentally it is different from last year," said Yoshinori Shigemi, global market strategist at JPMorgan (NYSE:JPM) Asset Management.
"You could say that right now, rather than stocks rising around the world, it is the dollar falling against almost everything," he added.
The euro rose to $1.2556, its highest since December 2014. Having risen 2.37 percent so far this week, it could post its biggest weekly gain in nine months.
The dollar dropped to 105.545 yen, its lowest level since November 2016 and down 2.8 percent for the week, which would be the biggest in a year and a half.
The South African rand hit a three-year high of 11.6025 to the dollar on Thursday on hopes the resignation of President Jacob Zuma had paved the way for new leaders to speed up economic growth.
The dollar's fall came even as U.S. bond yields remained near a multi-year high.
The 10-year U.S. Treasuries yield hit a four-year peak of 2.944 percent on Thursday and last stood at 2.910 percent.
Shorter-dated yields also rose as investors grew convinced that the correction in stock prices in recent weeks would not prevent the Fed from raising interest rates in March and twice more this year.
Cleveland Fed president Loretta Mester said on Tuesday the recent stock market sell-off and jump in volatility will not damage the economy's overall strong prospects. Mester is being considered a leading candidate for the Fed's Vice Chair.
The two-year yield rose to as high as 2.213 percent, its highest since Sept 2008, on Thursday and last stood at 2.210 percent.
Oil prices maintained this week's gains, with U.S crude futures trading at $61.65 per barrel, up 4.1 percent so far this week.
Elsewhere, virtual currency bitcoin recovered the $10,000 mark for the first time in two weeks, gaining more than 70 percent from its near three-month low of $5,920.7, before easing back a tad to $9,925.
Oil prices rose by around 1 percent on Thursday to extend gains from the previous session, lifted by a weak dollar and Saudi comments that it would rather see an undersupplied market than end a deal with OPEC and Russia to withhold production.
U.S. West Texas Intermediate (WTI) crude futures were up 83 cents, or 1.4 percent, from their last settlement at $61.43 a barrel at 0744 GMT, adding to a 2.4-percent gain from the day before.
Brent crude futures were at $64.99 per barrel, up 63 cents, or 1 percent, extending Wednesday's 2.6-percent climb.
Prices rose on the back of ongoing weakness in the U.S. dollar, which on Thursday hit a 15-month low against Japan's yen.
A weaker greenback potentially stokes consumption of dollar-denominated commodities as it makes fuel and raw materials cheaper for countries using other currencies.
"On commodity markets, everyone loves a lower U.S. dollar," said Greg McKenna, chief market strategist at futures brokerage AxiTrader.
More fundamentally, oil markets got a push from comments by Saudi Arabia, the de-facto leader of the Organization of the Petroleum Exporting Countries (OPEC), voicing support for output cuts backed by OPEC and other producers including Russia since 2017 in an effort to tighten the market and prop up prices.
"If we have to err on over-balancing the market a little bit, so be it," Saudi Energy Minister Khalid al-Falih said on Wednesday. "I think we are going to be sticking with our policy (to withhold production) throughout 2018."
Stephen Innes, head of trading for Asia-Pacific at futures brokerage OANDA in Singapore, said "the Saudi signal is reasonably convincing, suggesting OPEC and their partners are committed to maintaining an absolute floor on oil prices".
The OPEC-led effort to tighten markets is showing results. In Asia, the world's biggest and fastest growing oil consumer region, storage tanks around Singapore's trading hub have depleted significantly over the past half-year.
However, threatening to undermine the OPEC-led effort to tighten markets is soaring production in the United States, which is not participating in the pact to cut.
U.S. crude oil production rose to a record 10.27 million barrels per day (bpd), more than top exporter Saudi Arabia pumps and within reach of No.1 producer Russia.
Consequently, U.S. crude inventories climbed by 1.8 million barrels in the week to Feb. 9, to 422.1 million barrels, the Energy Information Administration said on Wednesday.
"Although we remain positive on crude oil prices until year-end, an interim correction into 1Q18 cannot be ruled out," said Barnabas Gan, economist at OCBC Bank in Singapore.
Asian stocks rose on Thursday after Wall Street brushed aside strong U.S. inflation data and surged, in a move that also saw the dollar pinned to two-week lows even as Treasury yields jumped in anticipation of more rapid U.S. interest rate hikes.
Spreadbetters expected European stocks to also open higher, with Britain's FTSEseen rising 0.5 percent, Germany's DAX gaining 1 percent and France's CACadvancing 0.8 percent.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.3 percent.
Australian stocks climbed 1.15 percent and South Korea's KOSPI added 1.1 percent. Japan's Nikkei advanced 1.5 percent following three successive days of losses that took it to a four-month low the previous day.
U.S. shares surged on Wednesday, with the Dow up 1 percent and the S&P 500climbing 1.34 percent, as investors shrugged off the stronger-than-expected inflation data and snapped up shares of Facebook (NASDAQ:FB), Amazon.com (NASDAQ:AMZN) and Apple (NASDAQ:AAPL). (N)
S&P mini futures rose 0.4 percent on Thursday.
The VIX index - Wall Street's "fear gauge" and a measure of market volatility - has declined below 20, less than half the 50-point peak touched last week.
U.S. consumer prices rose slightly more than forecast in January as Americans paid more for gasoline, rental accommodation and healthcare, further raising inflation concerns and worries that the Federal Reserve may hike interest rates more than earlier expected.
That drove U.S. Treasury yields on most maturities higher, with those on benchmark 10-year notes hitting a four-year high of 2.928 percent.
Other data on Wednesday showed U.S. retail sales fell 0.3 percent in January to mark the biggest decline in 11 months. This was well below forecasts for an increase of 0.2 percent, suggesting slower growth could accompany higher inflation.
"The combination of stellar U.S. CPI and weak retail sales data leaves investors in a precarious situation," wrote strategists at CitiFX.
"Strong price data presents hawkish risks for the Fed's dots at the March meeting. Three dots have been the baseline and now four seems a greater risk. Meanwhile, retail sales results have caused a downgrade of GDP estimates across the Street."
Dot plots represent Fed officials' expectations for interest rate hikes.
The dollar index against a basket of currencies slipped 0.3 percent to 88.879 after losing more than 0.6 percent overnight despite the strong inflation number.
The recovery in broader risk sentiment was seen weighing on the dollar, which had gained during the market turmoil earlier in the month.
The U.S. currency has been weighed down by a variety of factors this year, including concerns that Washington might pursue a weak dollar strategy and the perceived erosion of its yield advantage as other countries start to scale back their easier monetary policy. Concerns about the growing U.S. fiscal deficit have also intensified.
The dollar stretched overnight losses against the Japanese yen to touch a 15-month low of 106.300, having declined more than 2 percent so far this week, causing the Nikkei to underperform its global peers.
"Japanese stocks could act as drag to their regional counterparts if the stronger yen hampers its performance. In that respect the strong yen could be seen as a factor preventing the stabilization in global markets," said Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo.
The euro extended gains to reach a 10-day high of $1.2473 after surging 0.8 percent the previous day.
The South African rand traded at 11.73 per dollar and near a 2-1/2-year high of 11.66 set overnight after the country's ruling African National Congress (ANC) said it would proceed with a vote to remove President Jacob Zuma from office.
The Australian dollar added to the previous day's rally and reached a 10-day top of $0.7946.
In commodities, Brent crude futures were up 1.1 percent at $65.06 per barrel after prices surged the previous day as U.S. crude stocks rose less than expected and Saudi Energy Minister Khalid al-Falih said major oil producers would prefer tighter markets than end supply cuts too early.
Crude also benefited from the dollar's weakness. Oil tends to move inversely to the dollar, and has also of late been trading in tandem with stocks.
Spot gold rose to a 10-day top of $7,195 per ounce and on track for a weekly gain of more than 6 percent, supported by the sagging dollar and as the metal drew demand as a hedge against inflation following the rise in U.S. inflation.
The dollar slid to a 15-month low against the yen on Wednesday, as investors remained on edge ahead of key U.S. inflation numbers later in the day, underscoring fragile risk sentiment following the recent shakeout in equity markets.
The U.S. currency was 0.8 percent lower at 106.960 yen after plumbing 106.840, its weakest since November 2016, with a drop in Japanese shares increasing demand for the yen which is often sought in times of market turmoil.
The dollar had enjoyed a brief respite against its Japanese peer overnight as U.S. shares managed to gain for the third successive session on Tuesday following last week's sharp downturn. But it began to wobble again as Japan's Nikkei surrendered early gains and fell to four-month lows on Wednesday.
Near-term focus was on how far the dollar would slide against the yen after falling below 107.320, which was seen as a key technical level, with the market paying little heed to jawboning by Japanese officials.
Japan's Chief Cabinet Secretary Yoshihide Suga warned on Wednesday that stable currency market moves were "extremely important", signaling concern over recent yen gains that could undermine a strengthening economic recovery.
"Trend-following macro funds see the yen appreciating further. There are no fresh factors, but for speculators, anything that appears yen-supportive is welcome, even in hindsight," said Yukio Ishizuki, senior forex strategist at Daiwa Securities in Tokyo.
Lingering expectations the Bank of Japan would follow the Federal Reserve and the European Central Bank in eventually normalizing monetary policy have helped the yen appreciate, even though the Japanese central bank has reiterated that it intends to stick to its ultra-easy stance.
"Many trend-following players have a scenario drawn up in which the BOJ follows a monetary policy normalization cycle," said Koji Fukaya, president at FPG Securities in Tokyo.
"However, following such a scenario and driving the yen higher means that the BOJ would be even more determined to stick to an easy policy and prevent the currency from appreciating and shield the domestic stock market."
Volatility in the risk asset markets have been a key driver of currencies and investors now await U.S. January inflation data due at 1330 GMT, with the indicator seen either upsetting the equity market's fragile recovery or clearing the way for additional gains.
Wall Street shares slumped from record highs scaled late in January after Treasury yields rose to four-year highs, largely because of inflation worries.
Seasonally adjusted U.S. consumer price index data is expected to show inflation of 0.3 percent in January versus 0.1 percent in December.
The dollar's fall against the yen comes against the currency's broader declines against a number of peers.
The U.S. currency attracted demand during the global market tumult seen earlier this month, although it had fallen to a three-year low against a basket of currencies in January.
The dollar was weighed by factors including the prospect of the United States pursuing a weak dollar strategy and the greenback enjoying less interest rate advantage as other countries part with easy monetary policy.
The dollar index against a group of six major currencies was down 0.3 percent at 89.446 after dropping nearly 0.6 percent overnight.
The euro added to overnight gains and last traded up 0.25 percent at $1.2383 after going to a one-week high of $1.2392.
Against the yen, however, the common currency fell 0.6 percent to 132.365 yen.
The Swiss franc rose 0.35 percent to 0.9313 franc per dollar and the pound added 0.2 percent to $1.3919.
The New Zealand dollar gained 0.65 percent to $0.7320 after a Reserve Bank of New Zealand's quarterly survey showed business managers forecast annual inflation to average 2.11 percent over the coming two years, from 2.02 percent in the previous survey.
The Australian dollar was 0.2 percent higher at $0.7877.
Wall Street climbed on Tuesday for a third straight session, buoyed by Amazon.com and Apple, while investors focused on inflation data on Wednesday that could upset the market's fragile recovery - or clear the way for additional gains.
Amazon.com (O:AMZN) rose 2 percent while Apple (O:AAPL) added 1 percent, both helping the S&P 500 shake off a negative open to the session and climb 0.26 percent by the close.
Investors said data on U.S. consumer prices and retail sales due out on Wednesday will be key to where stocks move in the short term. Inflation and interest-rate fears sparked a stock market rout after U.S. jobs data was released on Feb. 2.
Rob Haworth, a senior investment strategist at U.S. Bank Wealth Management, said the market's recovery from a negative start earlier in the session was a good sign, but that it remained too soon to predict the market's return to stability.
"We think we're going to be volatile for a few more trading days at least, as the market sorts out what’s really been going on," Haworth said.
Among the biggest movers was sportswear retailer Under Armour (N:UAA), up more than 17.36 percent on strong quarterly sales, and AmerisourceBergen (N:ABC), up 9.30 percent after the Wall Street Journal reported Walgreens (O:WBA) was seeking to buy out the drug distributor.
Cleveland Fed President Loretta Mester, a voting member in the central bank's rate-setting committee this year, said the recent stock market sell-off and jump in volatility will not damage the economy's overall strong prospects.
Following a slump into correction territory last week, the S&P 500 has recovered 3.2 percent in the past three session. It remains down 7.3 percent from a record high on Jan 26 and is currently priced at levels first reached in early December.
The Dow Jones Industrial Average (DJI) rose 0.16 percent to end at 24,640.45 points, while the S&P 500 (SPX) gained 6.94 points to close at 2,662.94.
The Nasdaq Composite (IXIC) added 0.45 percent to 7,013.51.
Nine of the 11 major S&P indexes rose, led by real estate <.SPLRCR>, up 0.54 percent.
Benchmark U.S. 10-year Treasury yields (US10YT=RR) dipped to 2.842 percent, shy of a four-year peak of 2.9020 percent hit on Monday.
The CBOE Volatility Index (VIX), a widely-followed measure of short-term stock volatility and seen as a contributing factor itself to the sell-off, was last at 25.3 points, half the 50-point mark it touched last week.
Following Wall Street's recent swings, the S&P 500 is down 0.4 percent for the year. The tech-heavy Nasdaq is up 1.6 percent in 2018.
On a day of heavy trading in healthcare companies, Henry Schein (O:HSIC) and Patterson Companies (O:PDCO) fell 6.64 percent and 5.19 percent, respectively, after news of a U.S. Federal Trade Commission complaint against the dental supply firms.
Investors in those and other healthcare distributors are weighing the possible ramifications of the AmerisourceBergen deal and a report of Amazon's (O:AMZN) push into the sector.
Of the 70 percent of the S&P 500 companies that have reported earnings, nearly 78 percent of them topped profit expectations, according to Thomson Reuters data. That is above the 72 percent average beat-rate in the past four quarters.
Advancing issues outnumbered declining ones on the NYSE by a 1.31-to-1 ratio; on Nasdaq, a 1.48-to-1 ratio favored advancers.
About 6.4 billion shares changed hands in U.S. exchanges on Friday, below the 8.4 billion daily average over the last 20 sessions.
The dollar retreated on Tuesday as global equity markets tried to find their footing after last week's rout, reviving investors' appetite for riskier assets.
Still, many market players are not convinced the worst is over, with U.S. bond yields stuck at elevated levels ahead of Wednesday's U.S. consumer price data that could rekindle worries about inflation.
"I think markets will remain shaky until (Federal Reserve Chairman Jerome) Powell's congressional testimony on Feb. 28. Markets will try to test him until they hear his thinking," said a trader at a U.S. bank.
The dollar's index against a basket of six major currencies fell 0.3 percent to 89.923, edging further away from Thursday's half-month high of 90.569.
The euro traded at $1.2290, bouncing off last week's low of $1.2206, though it was still more than two cents below its 3-year high of $1.2538 hit on Jan. 25.
Buying the euro was one of the popular trades earlier this year on the view that the European Central Bank will scale back its stimulus later this year on the back of a strong recovery in the euro zone economy.
Although many market players remain bullish on the euro in the long term, the currency lacks fresh catalysts for further gains amid uncertainties ahead of Italy's election in early March.
In Germany, Chancellor Angela Merkel and the leader of the Social Democrats (SPD) face criticism from within their own parties over a new coalition deal that must still be approved by disgruntled SPD rank-and-file members.
The risk reversal spreads for euro/dollar options have widened in favor of euro puts, suggesting investors have grown more cautious about the chances the single currency will fall.
The British pound edged up to $1.3846 from Friday's low of $1.3764. Despite uncertainties around Brexit, the pound has been propped up by rising expectations the Bank of England will raise interest rates to curb inflation.
Rising risk appetite initially helped to lift the dollar against the yen but the upbeat mood quickly disappeared when traders saw Japanese shares failing to maintain hefty gains made in the morning.
The dollar fell more than 0.5 percent to 108.01 yen as the Nikkei erased its 1.4 percent intraday gain to end down 0.7 percent at a four-month closing low.
Global stock markets staged a strong rebound since a brutal sell-off that began late January on worries about rising inflationary pressure.
Higher inflation could prompt the Federal Reserve to tighten its policy faster than expected. Alternatively, if the Fed doesn't act fast enough and falls behind the curve on policy, it could end up pushing up long-term bond yields. In either scenario, traders worry that U.S. growth could be hampered.
There were some indications such fears are beginning to subside, with Wall Street shares rebounding strongly on Monday and MSCI's all-country world index of stock performance rising 1.2 percent.
Still, market players are on guard for more volatility.
The 10-year U.S. bond yield hit a four-year high of 2.902 percent while the 30-year yield rose to 11-month high of 3.199 percent.
"Rise in long-term bond yields lifts mortgage lending costs and is likely to cool the economy," said Minori Uchida, chief FX analyst at the Bank of Tokyo-Mitsubishi UFJ.
Uchida said the dollar is likely to remain under pressure against the yen.
The South African rand slipped 0.3 percent to trade at 11.96 rand to the dollar, surrendering early gains made after reports the ruling African National Congress party executive committee had decided to "recall" or remove President Jacob Zuma as head of state.
Asian stocks pulled further away from two-month lows on Tuesday, lifted by Wall Street's extended rebound from last week's steep fall, but investors remained cautious ahead of U.S. inflation data later in the week.
Spreadbetters expected a higher open for European equities, forecasting 0.25 percent gains for Britain's FTSE and 0.3 percent for Germany's DAX and France's CAC.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 1.1 percent after sliding to its lowest level since Dec. 11 on Friday.
Australian stocks rose 0.6 percent and South Korea's KOSPI climbed 0.65 percent. Japan's Nikkei started higher but lost steam to slip 0.75 percent.
The Shanghai Composite Index was 1 percent higher, buoyed by global gains and suggestions of possible Chinese government support.
An affiliate of China's securities regulator on Monday encouraged major shareholders of domestically-listed firms to increase their holdings after last week's global selloff mauled Chinese stocks.
Wall Street's three major indexes rose for the second day on Monday as investors regained some confidence after U.S. equities had their biggest weekly drop in two years.
Still, caution lingered in the broader markets following the U.S.-led tumble in riskier assets last week and ahead of U.S. inflation data on Wednesday. A stronger-than-expected reading on price pressures could trigger a fresh wave of selling.
"It is hard at this stage to tell if the U.S. markets have bottomed out, considering that bets against the dollar still remain significant," said Kota Hirayama, senior emerging markets economist at SMBC Nikko Securities in Tokyo.
"On the other hand, attempts by investors to pull money out of the emerging markets during last week's turmoil appeared to have been unexpectedly limited, so that is an encouraging sign."
Wednesday's U.S. inflation data will be watched closely by jittery markets.
"The consumer prices numbers bear close watching as if it shows a strong rise, that could rattle U.S. long-term yields and impact equities negatively," said Koji Fukaya, president of FPG Securities in Tokyo.
The 10-year Treasury note yield edged back to 2.849 percent after rising to a four-year peak of 2.902 percent on Monday.
The dollar index against a basket of six major currencies extended modest losses suffered overnight and dipped 0.25 percent to 89.987. The index edged back from a two-week high of 90.567 scaled late last week, when it had benefited as a safe haven in the wake of the global market selloff.
The greenback lost 0.3 percent to 108.285 yen, weighed by the sagging Nikkei. The euro added 0.15 percent to $1.2310.
The South African rand was little changed at 11.91 per dollar after slipping briefly following news that the country's ruling party African National Congress had opted to sack President Jacob Zuma.
The rand had risen 2 percent over the past two days, helped by hopes that Zuma would step down, but ran into resistance as the latest news was seen potentially prolonging the political standoff.
The Australian dollar was steady at $0.7866 after rising about 0.6 percent overnight on the back of higher commodity prices and improvement in broader risk sentiment.
Copper prices also bounced further away from two-month lows as more stable global markets encouraged investors to return to commodities.
Copper on the London Metal Exchange extended an overnight rally to trade 1.4 percent higher at $6,927.00 per tonne.
Commodities were also supported by the dollar's pullback from two-week highs. A lower greenback favors non-U.S. buyers by reducing the price of dollar-denominated commodities.
Brent crude rose 0.55 percent to $62.94 per barrel.
Spot gold was 0.3 percent higher at $1.326.51 an ounce.
The yen edged higher versus the dollar on Monday, but traded below a five-month high as a bounce in U.S. equities late last week dampened demand for traditional safe haven currencies.
The dollar eased 0.1 percent to 108.70 yen, but remained above Friday's trough of 108.05 yen, its lowest level since Sept. 11. The dollar last week fell nearly 1.3 percent against the yen.
The yen tends to attract demand in times of market stress as the currency is backed by Japan's current account surplus, which offers it more resilience than currencies of deficit-running countries.
The U.S. S&P 500 (SPX) gained 1.5 percent on Friday, ending a wild week with a burst of buying, but still recorded the worst week in two years. Despite the bounce, investors were bracing for more volatile trading days ahead.
During Asian trading hours on Monday, S&P 500 e-mini futures edged higher and were up 0.5 percent as of 0406 GMT.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.1 percent.
Reports late last week that the Japanese government had decided to nominate Haruhiko Kuroda for a rare second term as Bank of Japan governor when his current one expires in April, signaling the BOJ's ultra-loose monetary policy will remain in place, were seen as a factor that could potentially weigh on the yen and temper its gains.
Prime Minister Shinzo Abe's government is to present Kuroda's nomination to parliament later this month, a person briefed on the matter said on Saturday.
Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore, said on Monday: "It's not as if the dollar is going to rise sharply against the yen in the next couple of days just because Kuroda is set to be re-appointed".
"But once the market settles down, focus will probably return to differences in monetary policy... and that could give the dollar an upward bias against the yen," he said.
For now, however, the yen is likely to take its cues from moves in U.S. and global equities, Okagawa said, adding that it may take a few weeks for markets to regain some calm.
The yen had risen last week as global equity markets tumbled and volatility soared - moves that came after U.S. bond yields jumped on heightened worries about inflation.
Given the focus on inflation, investors may be taking a wait-and-see stance ahead of data on U.S. consumer price index due on Wednesday, said Teppei Ino, an analyst for Bank of Tokyo-Mitsubishi UFJ in Singapore.
If the U.S. CPI data for January comes in strong and triggers a renewed rise in bond yields, that could dent equities and spur demand for the yen, Ino added.
Against a basket of six major currencies, the dollar eased 0.4 percent to 90.105 after gaining 1.4 percent last week.
Last week was the greenback's strongest against the currency basket in nearly 15 months as some traders closed out dollar-bearish bets, while others favored the dollar in a safe-haven move to exit other higher-returning but riskier currencies.
The euro edged up 0.3 percent to $1.2290. Last week, the common currency slid 1.6 percent, its worst weekly performance since November 2016, as declining risk appetites and higher volatility prompted market players to reduce their positions.
The euro was susceptible to such position-squaring because a popular trade before the recent market upheaval had been to buy the euro on expectations of the European Central Bank unwinding monetary stimulus.