A woman counts Japanese 10,000 yen notes in Tokyo, in this picture illustration. Image Credit: REUTERS

The yen rallied more than 1.8% against the dollar, reversing an earlier drop, with traders on high alert for official Japanese intervention.

The currency surged to as much as 147.30 per dollar. It had earlier fallen to its lowest since 1990 amid a barrage of warnings from authorities trying to dissuade traders from testing its intervention strategy.

Authorities have repeatedly said they will step in to counter one-sided moves, although some analysts warn that any intervention will have a limited impact as long as the Bank of Japan maintains a policy of rock-bottom interest rates while peer central banks hike.

In September, the government intervened to support the currency for the first time since 1998, after it fell to 145.90 per dollar.