The dollar, on the sell side for 3 1/2 months, sank to the 115 yen level a fortnight ago and hit parity with the euro.
It then rebounded, after Federal Reserve Chairman Alan Greenspan issued a warning.
Bleak global stock prospects have meanwhile made investors cautious about risks.
The dollar has now regained the 120 yen level and risen above parity with the euro, after its steep mid-July fall due to speculative sales not based on fundamentals.
It is still unclear, however, if the dollar-selling mood has changed. Market players may rediscover the real meaning of "irrational exuberance."
The dollar's fast fall may push investors toward other financial products with lower risks. U.S. Treasury bonds, Swiss francs and commodities may be temporarily attractive, although players may later shift to other products subject to large fluctuations but traded at low prices.
It will be necessary to wait and see how much money flows into the latter products, as money shifts appear to have begun. Dollar-yen trade will probably see a mixture of buying and selling for a while.
There is no reason for investors to buy Japanese stocks now. Thus, the yen may dip, and the market will learn how strong the dollar-selling powers of exporters are.
The dollar will probably trade between 116.50 yen and 121.50 yen in the near future. The market will be volatile but not a panic environment.