Commodity currencies climbed with the New Zealand dollar hitting a fresh post-float high against the U.S. dollar, and the Australian dollar nearing a 29-year peak hit last week.
The yen pulled back from last week's four-month peak against the dollar, a rise that had lifted the Japanese currency close to a record and stirred some jitters about the possibility of yen-selling intervention by Japanese authorities.
But market players said the yen's retreat against the dollar was likely to be short-lived, given lingering worries that the U.S. sovereign rating could be downgraded, as well as concerns about the outlook for U.S. economic growth.
"Downward pressure on dollar/yen is likely to strengthen, once short-term dollar short-covering runs its course," said Junya Tanase, chief FX strategist for JPMorgan Chase Bank in Tokyo.
Tanase added that JPMorgan had lowered its year-end forecast for dollar/yen to 75 yen from 78 yen previously, and was now expecting the dollar to fall further from there to 73 yen at the end of June 2012.
The dollar rose 0.9 percent against the yen to 77.45 yen. The dollar had hit a four-month low of 76.70 yen late last week on trading platform EBS, nearing a record low of 76.25 yen struck in March.
The dollar hit an intraday high just above 78 yen earlier, after U.S. President Barack Obama on Sunday announced a last-minute deal to raise the U.S. borrowing limit and urged lawmakers to approve the proposed agreement.
The dollar faces resistance at 78.53 yen, the 38.2 percent retracement of its slide from a peak hit in early July down to Friday's four-month trough.
Another factor that may limit the scope for a dollar rebound is selling interest from Japanese exporters, with traders saying some Japanese exporters were lowering the levels of their dollar offers to around 79 yen.
Against the Swiss franc, the dollar rose 0.7 percent to 0.7911 francs, pulling away from a record low near 0.7850 francs hit late last week.
The yen fell broadly while the Aussie dollar and the kiwi both rallied, with the New Zealand dollar hitting a post-float high of $0.8842 at one point and the Australian dollar rising 0.5 percent to $1.1050, nearing a 29-year peak of $1.1081 struck last week.
The euro held steady against the dollar at $1.4394.
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