The yen's long-term trend has likely turned to appreciation as the Bank of Japan raises rates and Japanese interest rates rise, Citi strategists say in a note. There are clear signs of change in the policy stance of the Sanae Takaichi administration, with its reflationary bias now likely to be diluted, the strategists write.

Having defeated deflation through former Prime Minister Shinzo Abe's economic policies dubbed Abenomics, Japan's shift from the policy of yen weakness is a necessary change, the bank says. The U.S. has also shifted its positioning from constraint of yen weakness to guiding the yen stronger, Citi says. The dollar is at Y156.64.

Attention shifts to the coming U.S. data including core PCE tonight and nonfarm payrolls on Friday, which will need to validate the market's pricing of more Fed rate increases, two strategists at OCBC Group Research say in a report. Stronger inflation and labor-market data could keep USD supported against Asian currencies.

"Any downside surprise could see Fed hike expectations pared and prompt some unwinding of recent USD longs," they add. The U.S. dollar is little changed at 1.2775 Singapore dollars. Meanwhile, market pricing for a 25bp rate increase at next FOMC meeting in October declined to 49% from 71% previously, the head of Foreign Exchange, International & Geoeconomics at CBA adds.