By Hiroyuki Kachi 
 

The dollar inched up against the yen, coming closer to hitting its year high in Asian trade Monday, with the greenback extending its gains following upbeat U.S. inflation data and comments by Federal Reserve Chairwoman Janet Yellen Friday.

The U.S. currency touched as high as Y121.78 before slightly weakening to Y121.67 around 0250 GMT. That is higher compared with Y121.55 late Friday in New York.

Getting a boost from upbeat U.S. inflation and Ms. Yellen's remarks, the dollar's uptick to its year high of Y122.04 set on March 10 has now come into sight.

U.S. core inflation in April, excluding volatile food and energy prices, showed the biggest gain since January 2013, while Mr. Yellen said the central bank is on track to raise interest rates sometime this year.

A solid gain in the Nikkei Stock Average gave a support to the dollar by allowing selling of the yen, perceived as a safe asset. The benchmark index rose 0.7% midday.

But investors found it difficult to make any major moves, with many overseas investors away on holiday and a lack of fresh trading cues. Financial markets are closed elsewhere in the world including the U.S. for Memorial Day and the U.K. for Spring Bank Holiday.

"Investors were scared of heights," when the dollar hit its year high in March, said Daisaku Ueno, chief FX strategist at Mitsubishi UFJ Morgan Stanley.

But after confirming solid downside support around Y118 and Y119, later in the year and then with "investors' eyes accustomed to stay around Y120" in recent session, the dollar is now positioned better to try its upside against the yen, said Mr. Ueno.

Investors showed a muted reaction to Japan's merchandise trade balance for April released earlier Monday by the government.

A month after its first surplus in nearly three years, the world's third largest economy logged a Y53.4 billion deficit.

The euro was at $1.0988 from $1.1017, while the common currency was at Y133.68 from Y133.83.

The WSJ Dollar Index, a measure of the dollar against a basket of major currencies, was up 0.12% at 86.31.

 
Interbank Foreign Exchange Rates At 22:50 EST / 0250 GMT 
 
                           Latest       Previous   %Chg    Daily    Daily   %Chg 
Dollar Rates                               Close            High      Low  12/31 
 
USD/JPY Japan           121.67-68      121.56-57  +0.09   121.79   121.56  +1.63 
EUR/USD Euro            1.0985-88      1.1013-16  -0.25   1.1015   1.0972  -9.19 
GBP/USD U.K.            1.5476-78      1.5488-90  -0.08   1.5489   1.5464  -0.65 
USD/CHF Switzerland     0.9426-30      0.9427-31  -0.01   0.9452   0.9428  -5.18 
USD/CAD Canada          1.2289-94      1.2278-83  +0.09   1.2308   1.2281  +5.77 
AUD/USD Australia       0.7821-25      0.7823-27  -0.03   0.7825   0.7803  -4.26 
NZD/USD New Zealand     0.7300-06      0.7304-10  -0.05   0.7307   0.7292  -6.31 
 
Euro Rate 
EUR/JPY Japan           133.66-70      133.82-86  -0.12   133.84   133.56  -7.77 
Source: ICAP PLC 
 

Write to Hiroyuki Kachi at Hiroyuki.Kachi@wsj.com