During European late morning trade, the dollar pulled back from two-week highs against the yen, with USD/JPY edging up 0.09% to 97.91, after touching highs of 98.70.
The safe haven yen found support as concerns over financial stability in China hit market sentiment, after the People’s Bank of China said lenders must meet higher requirements in liquidity management.
Demand for the dollar continued to be underpinned after Fed Chairman Ben Bernanke said last week the bank could begin slowing asset purchases by the end of this year and wind them down completely by the middle of 2014 if the economy continues to pick up.
The dollar was trading close to two-week highs against the euro, with EUR/USD sliding 0.13% to 1.3106.
Sentiment on the euro remained fragile as peripheral euro zone bond yields continued to grind higher amid concerns over the prospect of an end to the Fed’s stimulus program.
The yield on Spanish 10-year bonds rose to 5% for the first time since early April on Monday, up from 4.88% on Friday. Meanwhile, the yield on Italian 10-year bonds climbed to 4.71% from 4.58% on Friday.
The single currency showed little reaction after a report showed that the Ifo index of German business climate improved to 105.9 in June from 105.7 in May, in line with market expectations.
Elsewhere, the greenback was higher against the pound, with GBP/USD down 0.44% to 1.5354.
The dollar was almost unchanged against the Swiss franc, with USD/CHF inching up 0.01% to 0.9344.
The greenback was broadly higher against its Australian, New Zealand and Canadian counterparts, with AUD/USD dropping 0.28% to 0.9189, NZD/USD falling 0.28% to 0.7718 and USD/CAD advancing 0.45% to 1.0507.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.18% to 82.76.