Trading in dollar/yen remained relatively choppy after Japan's yen-selling intervention on Monday, which major Japanese daily the Asahi newspaper said reached a record 10 trillion yen ($128 billion).
That was broadly in line with estimates among some market players of between $90 billion to $130 billion, and would exceed the roughly $59 billion in yen-selling intervention that Japan conducted during its previous intervention in August.
The options market, however, showed bets on the yen's gains against the dollar on a one-month horizon had not eased significantly, reflecting the market's belief that the impact of intervention would not last more than a few weeks.
Steve Barrow, strategist at Standard Bank, said if the intervention was not repeated, just as the case back in August, then dollar/yen could quickly return to the 75 region.
"We feel that the BOJ needs to vary the tactics here and would be better served by intervening intermittently in order to hang on to the gains it has made so far," he said.
"Even this tactic would not stop dollar/yen falling to our target of 70, but at least it might mean that this is a long-term possibility rather than a near-term probability."
Earlier, the dollar briefly surged around 60 pips or so to an intraday high of 79.10 yen but then quickly gave back its gains, and traders said the rise was unlikely to have been caused by intervention.
The dollar held steady from late US trade on Monday at 78.15 yen , having backed off a three-month high of 79.55 yen hit on Monday but well above levels seen before intervention of around 75.65 yen or so.
Japan's previous intervention in August, as well as the joint yen-selling intervention it conducted with other Group of Seven nations in March, were both one-day actions, and it is unclear whether Japan is ready to intervene more frequently this time around.
"I don't think the chances of a drastic change are very high," said Junya Tanase, chief FX strategist for J.P.Morgan in Tokyo.
Japan may have a hard time gaining international understanding toward efforts to weaken the yen at a time when European and US economies are facing difficulties as well, Tanase said, adding that the dollar was likely to trade roughly between 75 yen to 80 yen for the rest of the year.
EURO OFF RECENT PEAK
One of the reasons supporting underlying demand for the yen is that it is the least unattractive among the G3 currencies.
Indeed, despite last Thursday's euro zone summit deal, doubts about how those measures could be implemented continued to haunt the common currency.
News that the Greek prime minister has called an unexpected referendum on a new EU bailout deal for his debt-ridden country coupled with persistent pressure on Italian bonds renewed worries about the region.
The euro dipped 0.1 percent to $1.3843 , having reversed all of the gains to $1.4248 made last Thursday after the debt deal was announced.
"The depth and breadth of unanswered questions from Thursday's EU deal, the spectacle of euro-peripheral bonds yields/yield spreads mostly higher Monday and general support afforded the USD from the BOJ's intervention, ensured EURUSD traded down in fits and starts throughout Monday," BNP Paribas analysts wrote in a note.