By Hiroyuki Kachi 
 

The yen gained to a fresh 18-month high against the dollar in rangebound Asian trade on Monday, with investors still feeling the heat of the Bank of Japan's decision to hold fire last week.

The U.S. dollar declined to as low as Y106.14 earlier in the session, its lowest since Oct. 17 2014, before bouncing back to Y106.60 around 0450 GMT. This compares with Y106.45 late Friday in New York.

The Japanese currency strengthened at a rapid pace, as the BOJ's inaction Thursday dashed hopes for more stimulus especially among non-Japanese investors.

On Monday, trading volume was thin with many Japanese corporate players and institutional investors away in the middle of Japan's Golden Week holiday season. Government offices and financial markets will be closed May 3-5 for national holidays.

"There still remain the aftereffects of the BOJ's inaction," said Daisaku Ueno, chief FX strategist at Mitsubishi UFJ Morgan Stanley. He said what's supporting the dollar is caution against a possible intervention by Japanese currency authorities. Investors also remain vigilant about the rapid pace of yen buying in past two sessions.

Mr. Ueno said, "it makes sense for the Japanese government to step into the market," as the dollar's fall by nearly 6 yen over just two days is a clear sign that short-term players have been driving the selling.

But he said a "real bullet" intervention is unlikely in the immediate future, given the U.S. Obama administration's semiannual currency report and doubts about a sustained effect of a currency intervention at the current level.

The U.S. Treasury Department, in its semiannual currency report to Congress, named Japan among other major exporters in a new monitoring list, calling them out for relying on policies it says threaten to damage the U.S. and the global economy.

The report called recent yen movements "orderly" and also urged Japan to adhere to G-20 and G-7 commitments regarding exchange rate policies. The report shows a stark contrast with Japanese authorities' description of the yen movement as "one-sided" and speculator-driven.

The report is sometimes an occasion for the U.S. to scold its international peers and contains cues for the future of exchange rates.

In other currency-pair trading, the euro was at $1.1465 from $1.1455. The common currency was at Y122.24 from Y121.84.

The WSJ Dollar Index, a measure of the dollar against a basket of major currencies, was down 0.03% at $84.94.

 
Interbank Foreign Exchange Rates At 00:50 EST / 0450 GMT 
 
                           Latest       Previous   %Chg    Daily    Daily   %Chg 
Dollar Rates                               Close            High      Low  12/31 
 
USD/JPY Japan           106.61-62      106.50-51  +0.10   106.66   106.16 -11.37 
EUR/USD Euro            1.1466-69      1.1448-51  +0.16   1.1483   1.1450  +5.59 
GBP/USD U.K.            1.4608-10      1.4610-12  -0.01   1.4623   1.4600  -0.86 
USD/CHF Switzerland     0.9589-93      0.9591-95  -0.02   0.9593   0.9577  -4.28 
USD/CAD Canada          1.2540-45      1.2551-56  -0.09   1.2554   1.2530  -9.37 
AUD/USD Australia      0.7597-601      0.7606-10  -0.12   0.7623   0.7595  +4.28 
NZD/USD New Zealand     0.6991-97      0.6977-83  +0.20   0.7020   0.6980  +2.36 
 
Euro Rate 
 
EUR/JPY Japan           122.25-29      121.91-95  +0.28   122.31   121.84  -6.51 
 
Source: Tullett Prebon 
 

Write to Hiroyuki Kachi at Hiroyuki.Kachi@wsj.com

(END) Dow Jones Newswires

May 02, 2016 01:30 ET (05:30 GMT)