The Japanese yen rallied to near two-week highs against the euro on Monday following reports the central bank was debating moves to scale back its massive monetary stimulus.
Also pushing the yen up were comments by U.S. President Donald Trump on Friday criticizing the greenback's strength, which in turn hit the Japanese stock markets and triggered a further unwinding of short yen positions.
"The headlines about the Japanese central bank planning to tweak its policy stimulus is triggering this big yen move but unless we see some concrete steps, the yen's strength may falter," said Manuel Oliveri, a currency strategist at Credit Agricole in London.
The Bank of Japan, facing stubbornly low inflation, is in unusually active discussions before this month's policy decision, with changes to its interest-rate targets and stock-buying techniques on the table, people familiar with the central bank's thinking told Reuters.
The central bank is scheduled to hold its next monetary policy meeting on July 30 and 31.
The BOJ's current policy, adopted in mid-2016, consists mainly of negative short-term interest rates, keeping the 10-year yield around zero percent and buying about six trillion yen of stocks through exchange traded funds (ETFs).
The Japanese yen rallied half a percent against the euro EURJPY=EBS to 130.70 yen, its highest since July. 11. It rose by a similar margin against the dollar JPY=EBS 110.90 and against sterling at GBPJPY=EBS at 145.85 yen.
With short bets against the yen doubling to nearly 60 thousand contracts in the latest weekly data, according to CFTC, some traders expected more upside for the yen in the short term.
Trump's latest comments also boosted the yen.
CNBC reported on Friday that Trump was worried the Federal Reserve will raise interest rates twice more this year. Trump said the Fed's policy tightening and the strong dollar could hurt the U.S. economy.
Broader moves in currency markets were muted. The dollar index .DXY, a measure of its value against a basket of six major currencies, was down 0.1 percent at 94.327, slipping further from a one-year high of 95.656 touched on July 19.