LONDON: The yen rose on Friday after Japanese Finance Minister Taro Aso said the currency's fall over the past week was too rapid, in one of the strongest warnings against a weak yen since Japan started its aggressive monetary stimulus two years ago.
The dollar fell to 117.355 from around 118 yen before his comments.
It was last at 117.65 yen, down 0.5 percent on the day, and below a 7-year high of 118.98 yen struck on Thursday. The dollar has climbed almost 10 yen since the Bank of Japan surprisingly eased policy in late October.
The euro also fell against the yen to 147.25 yen, off a six-year high of 149.12 hit on Thursday.
The single currency was also hurt by comments from European Central Bank chief Mario Draghi who said inflation expectations were dropping to levels he considered excessively low.
Most of the focus was on Aso's comments, who said rapid currency moves, whether up or down, were undesirable.
His comments triggered profit-taking on bets placed against the yen that had been built up after the Bank of Japan's easing late last month and Prime Minister Shinzo Abe's decision to delay a planned tax hike and call a snap election.
"Aso's comments are not very surprising given he is speaking about the rapid pace of the yen's fall," said Yujiro Goto, FX strategist at Nomura. "While the comments will slow the pace of yen depreciation, I don't think it will change the overall momentum.
We can expect some consolidation here." Traders said investors would look to rebuild long dollar/short yen positions if the pair drops towards 117 yen.
"Although the market reacted to Mr. Aso's comments, I don't think it would have lasting impact on the yen," said Kosuke Hanao, head of FX at HSBC in Tokyo. "Market players had predicted that some kind of correction was inevitable anyway before Japan's long weekend and the US Thanksgiving week." Monday is a labour day public holiday in Japan.
The market mood remains bullish on the dollar also given the outperformance of the US economy. Figures out of the United States on Thursday was generally upbeat, led by a stunning jump in the Philadelphia Fed survey of manufacturing which soared to its highest since 1993.
Sterling dipped to $1.5655, hurt partly by a second victory by an anti-EU political party. Mark Reckless, a former Conservative party MP who defected to UKIP won the Rochester and Strood by-election.
The result underlined the political risk that will be a factor in Britain between now and the general election in May.
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