So much for currency manipulation.

The yen strengthened to its highest level against the dollar in more than two months on Monday, despite a wider rally for the greenback.

The dollar dipped below the 112 mark against the yen for the first time since late November, hitting 111.97 as US traders began to wake. At publication time the Japanese currency was 0.37 per cent stronger for the day, at 112.29.

Last week, Japanese prime minister Shinzo Abe was forced to defend the country’s monetary policy after US president Donald Trump accused the country of manipulating currency markets to artificially weaken the yen.

A widening gap between bond yields in the US and Japan, where the central bank has committed to keeping yields low, encouraged a fall in the yen in the aftermath of President Trump’s election, but the currency has reversed course since the start of the year as confidence in the so-called Trump trade has faded.

The yen is up 4 per cent so far in 2017, and has climbed more than 2.4 per cent over the last week.

Mr Abe is due to meet Mr Trump in Washington later this week, with the two leaders set to discuss trade ties in the wake of the president’s withdrawal from the multi-lateral Trans-Pacific Partnership.

The president has said any new trade deals will need to have “very, very strong controls on monetary manipulation and devaluation”.

But some analysts are cautioning not to expect any more major swings in the yen.

Jane Foley at Rabobank argued in a note today that competing pressures from the US and the Bank of Japan – which reiterated its commitment to unlimited bond purchases last week – will keep the yen and dollar in a tight trading range.

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