The dollar rose above 116 yen for the first time in two years a day earlier, but it was capped as concerns emerged about the health of US companies after an investigation was launched into General Motors Corp's accounting practices
By Friday, the market's attention had turned to gross domestic product figures, due at 1230 GMT, for confirmation that the US economy was in good condition and that the dollar-supporting rise in interest rates would continue.
"The market is waiting for GDP for direction," said Tatsuro Karitani, senior forex trader at Mizuho Corporate Bank.
"If the figures fall short of expectations, the dollar could test its downside, though I still see the currency on a solid upward trend."
The US economy likely grew 3.6 percent in the third quarter, speeding up from 3.3 percent in the previous quarter, according to a Reuters poll.
The dollar was buying 115.30 yen, down from around 115.45 in late US trade on Thursday, when it fell 0.3 percent.
Month-end selling of dollars for yen by Japanese exporters weighed on the US currency, while individual investors and Japanese importers kept support firm at 115 yen, traders said.
Traders said the yen got a lift from a Financial Times report that US Treasury Secretary John Snow had told China's leaders that Washington wanted to see another revaluation of the yuan before President George W. Bush visits Beijing next month.
The yuan hit a new post-revaluation peak of 8.0846 per dollar up just 0.3 percent since China revalued on July 21, the same amount as its theoretical one-day trading band.
Any strengthening of the yuan is expected to spill over into other Asian currencies.
The euro was little changed at $1.2140 after rising 0.6 percent on Thursday.
The single currency was fetching 139.95 yen, in sight of the previous day's six-month high of 140.20 yen.
The euro was supported by expectations that the ECB will raise rates early next year as economic growth picks up and inflation concerns grow.
The interest rate futures market has priced in a rise to 2.25 percent by March, up from the 2 percent that has been unchanged for more than two years.
"Some market participants are beginning to be concerned about the risks of an earlier rate hike," said Tomoko Fujii, currency strategist at Bank of America in Tokyo.
Traders were awaiting ECB speakers due later in the day, including chief economist Otmar Issing, for a clearer outlook on the ECB's attitude towards interest rates.
The dollar rose as high as around 116.25 yen on Thursday, supported by the prospects that the interest rate gap between the United States and Japan would widen even further.