The yen has come under fresh selling pressure amid speculation that both Tokyo and Washington are opting for a stronger dollar.

Expectations of the dollar's rise against the yen began running high late last week amid reports that the Organization for Economic Cooperation and Development has nudged the Bank of Japan to buy foreign securities to funnel more money into the banking system.

In its latest analysis of world economic prospects, the OECD sounded skeptical about the Japanese government's commitments to structural reforms, pointing to the need for the BOJ to guide the yen's value lower.

A member of the BOJ's policy-setting committee has raised the possibility of buying foreign securities, according to the minutes of its recent meeting.

There is speculation that the administration of U.S. President George W. Bush would welcome further monetary easing by Tokyo and allow the dollar to gain further ground against the yen.

Although expectations are running low of a further interest rate cut by the U.S. Federal Reserve next month, there appears little chance that U.S. short-term interest rates will soon turn higher.

Still, once signs of U.S. and global economic recovery become discernible, there appears a good chance that the dollar will gain further ground against the yen.

Given a wide gap in economic fundamentals and interest rates between Japan and the U.S., market participants would naturally opt for the dollar.

Washington is still left with more macroeconomic policy options than Tokyo and the yen's further fall would prompt foreign market participants to switch away from yen-based assets and head to the dollar.

Although skepticism remains among Japanese firms about the yen's further weakening, if the uptrend in the dollar's value gathers momentum, they would also jump on the dollar-buying bandwagon.

Speculative players, too, could then return to the market and begin vying for leadership in daily market activity, enticing Japanese firms and investors to trade yen for dollars.

The dollar's uptrend relative to the yen could then gather more momentum.