The yen weakened against the dollar on Tuesday, giving back some of its gains from suspected intervention by Japanese authorities. Strong US economic data on employment costs boosted the dollar.
The yen fell 0.88% against the greenback, but remained above its 34-year low. For the month, the yen is down 4.04% against the dollar.
The dollar index gained ground after data showed US labor costs increased more than expected. This confirms the surge in inflation earlier in the year, likely delaying a much-anticipated interest rate cut later this year.
Japanese officials may have spent some 5.5 trillion yen ($35.05 billion) in supporting the currency on Monday.
The Bank of Japan (BOJ) left its plan for monthly bond buying unchanged for May. Investors are looking for clues on the timing of a taper, which will lead to higher, more attractive yields, supporting the yen.
The Fed begins its two-day monetary policy meeting on Tuesday. The Fed is widely expected to hold rates at 5.25%-5.5%, while comments from Chair Jerome Powell will be closely watched for signs of the central bank's policy path.
Markets have continued to push back expectations for the timing of a rate cut this year. Odds for a cut in September of at least 25 basis points (bps) are just slightly below 50%.
The dollar index gained 0.52% at 106.24, with the euro down 0.42% at $1.0674. Sterling weakened 0.49% at $1.2499.
The dollar index was up 1.7% for April and poised for its biggest monthly gain since January. The euro is down 1.11% for the month and Sterling is down 1.02%, on track for its biggest monthly drop since September.
French and eurozone inflation data released on Tuesday boosted confidence that the European Central Bank (ECB) will be able to start lowering interest rates in early June. Euro zone inflation held steady as expected in April, but a crucial indicator on underlying price pressures slowed.