Investing.com - The dollar carried Friday's gains over the yen into Monday after the Bank of Japan surprised global markets by expanding its monetary stimulus program to ward off deflationary threats.
Upbeat U.S. data released earlier Monday added to the greenback's gains.
In U.S. trading, USD/JPY was up 1.49% at 114.00, up from a session low of 112.58 and off a high of 114.22.
The pair was expected to test support at 112.58, the session low, and resistance at 114.22, the session high.
The yen continued to succumb to broad selling pressure after the BOJ said last week it would raise its monetary base target to an annual increase of ¥80 trillion from ¥60-70 trillion, a preemptive move to steer the economy away from deflationary decline while improving the chances of reaching inflation goals.
Adding to pressure, a Japanese government panel overseeing the Government Pension Investment Fund approved plans on Friday for the fund to raise its holding of foreign stocks to 25% of its portfolio from 12%.
Friday's changes to Japanese monetary policy caught many investors off guard and sent the dollar soaring over the yen, especially as the Federal Reserve takes steps to make monetary policy less accommodative while Tokyo moves in the opposite direction.
Last week, the Fed announced it was closing its monthly bond-buying stimulus program.
Strong data out of the U.S. also bolstered the greenback.
The Institute of Supply Management reported earlier that its manufacturing purchasing managers' index rose to 59.0 in October from 56.6 in September. Analysts had expected the index to decline to 56.2 in October, and the surprise uptick sparked fresh demand for the dollar by stoking sentiments that U.S. recovery continues to gain steam.
On Friday the Thomson Reuters/University of Michigan final consumer sentiment index rose to a seven-year high of 86.9 in October from 86.4 in September. Analysts had expected the index to remain unchanged.
Also on Friday, industry data showed that the Chicago purchasing managers' index rose to a three-and-a-half year high of 66.2 in October from 60.5 in September, confounding expectations for a reading of 60.0.
Separately, the yen was down against the euro and down against the pound, with EUR/JPY up 1.13% at 142.28, and GBP/JPY trading up 1.39% at 182.16.
On Tuesday, expect the pair to track U.S. factory orders numbers.