The US dollar eased on its overnight levels in late trade as investors refrained from aggressive positioning ahead of tonight's US non-farm payrolls data.
With the US Federal Reserve stressing that future policy direction is conditional on economic data, players are paying more attention to indicators such as payrolls.
The median estimate in a Market News International survey of economists is for the payrolls to have risen by 275,000 after December's rise of 108,000.
The dollar's recent gains have put it precariously at risk of a sharp pullback while upside surprises to the payrolls numbers, in the past, have resulted in only marginal gains for the dollar.
After marking a seven-week high of 118.66 yen in London yesterday, the dollar-yen opened around 118.60 and then drifted lower as the more cautious of traders pared back their positions.
Market speculation of large dollar offers from an Asian central bank also spooked some players and the pair slipped to 118.34 yen before finding some support via bids from around 118.30, dealers said.
The pair traded sideways between 118.40 and 118.55 yen through the afternoon with talk of offers fronting a euro-yen 143.50 barrier capping the upside, dealers said.
Near the end of the session, the dollar was trading at 118.47 yen compared with 118.50 yen in late New York trade yesterday.
The euro was relatively stable against both the yen and the dollar after European Central Bank President Jean-Claude Trichet hinted last night that a rate rise was likely in March.
The euro marked a morning high of $1.2112 on stop-loss demand but then came off to trade largely between $1.2085 and $1.2100 through most of the afternoon.