The dollar rose broadly on Friday, as uncertainty over future US monetary policy was fanned by a Japanese newspaper report saying Lawrence Summers would soon be named to head the Federal Reserve.
Business daily Nikkei said the White House was expected to announce the decision
after the Fed's Sept. 17-18 meeting, at which it is expected to trim its bond buying.
Former treasury secretary Summers is seen as less dovish than Janet Yellen, the other leading candidate to replace Ben Bernanke, whose term ends next January.
Traders said although some doubted the credibility of the source, the report gave the dollar and US Treasury yields an added lift.
"This morning the Summers story was the main event...markets know Yellen is very dovish, so any candidate other than her would be dollar positive," said Lutz Karpowitz, currency analyst at Commerzbank.
He added that the effect was not very pronounced as investors were cautious ahead of the Fed meeting next week, where they would likely be more clarity on its 'tapering' plans.
The dollar was up 0.1 % on the day against a basket of currencies, with its index at 81.612, edging away from a two-week low of 81.356 set on Thursday.
The 10-year Treasury yield hit a peak around 2.957 %, up from Thursday's close of 2.905 %.
US retail sales and sentiment data due later on Friday could provide an extra boost to the dollar if they come in above market expectations. But the dollar was still on track for its first week of losses after four straight weeks of gains.
Following last Friday's weaker than expected US non-farm payrolls data, many traders and analysts expect the central bank to announce a modest $10 billion reduction in its $85 billion monthly bond-buying programme.
"Fed tapering is expected next week but the amount they are expected to reduce has been decreasing and this has weighed on the dollar," Commerzbank's Karpowitz said.
The dollar was last up 0.2 % at 99.72 yen, off an intraday high of 99.98 yen hit after the Nikkei report.
Earlier, the dollar rose against the yen after the government raised its view on the economy for the seventh time this year because of rising capital expenditure.
"In my view, anything that seems to edge away from deflation pressures is more negative for the yen," said Mitul Kotecha, head of global foreign exchange strategy for Credit Agricole. Analysts said, although the dollar has recently struggled to stay above 100 yen the uptrend was still intact.
"Dollar/yen will trade back to above the 100 level. Recently it has stalled near it but in the coming months we will see more yen-selling," said Neil Jones, head of hedge fund FX sales at Mizuho, who expects the dollar at 110 yen by early next year. The euro edged lower against a broadly firmer dollar, with the single currency easing 0.1 % to $1.3287.
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