The yen firmed 0.5 percent to 154.84 per dollar as of 0052 GMT, after sharp spikes on Friday sparked speculation over potential intervention. The New York Federal Reserve conducted rate checks on Friday, sources told Reuters, raising the chance of joint US-Japan intervention to halt the currency's slide.

"The cat-and-mouse game with the yen is likely to carry over to the new week's activity, but the one-way market has been broken, at least for the time being," said Marc Chandler, chief market strategist at Bannockburn Capital Markets in New York.

Japan's Nikkei dropped 1.6 percent in early trading while S&P 500 futures fell 0.4 percent and Nasdaq futures were 0.7 percent lower as traders awaited the Federal Reserve's policy meeting later in the week.

US President Donald Trump provided temporary relief to markets last week by reversing tariff threats and downplaying potential forceful action against Greenland. However, further sanctions targeting Iran have reinforced market anxiety.

Increased US pressure against Iran is pushing oil prices higher and lifting safe-haven gold to record peaks above $5,000 per ounce. Precious metals, including silver, have surged in a blistering rally so far this year.

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While authorities in Tokyo declined to comment on the yen's wild swings, sources told Reuters that the New York Federal Reserve conducted rate checks on Friday, leaving traders on edge at the prospect of an intervention that could come anytime.

Japanese Prime Minister Sanae Takaichi said on Sunday her government will take necessary steps against speculative market moves.

Michael Brown, senior research strategist at Pepperstone, said rate checks are typically the last warning before interventions take place, noting the Takaichi administration appears to "have a much, much lower tolerance for speculative FX moves than their predecessors."

"The risk/reward has now tilted massively out of the favor of short JPY positions, as nobody will be wanting to run the risk of being caught 5/6 big figures offside if/when the MoF, or their agents, do indeed pull the trigger."

A steep bond market rout in Japan last week had put the spotlight on Takaichi's expansionary fiscal policy as she called a snap election that is due for Feb. 8. The bond market has since stabilized somewhat, but investors remain jittery.

The yen was broadly firmer against other currencies too on Monday, inching away from the record low against euro and Swiss franc and multi-decade lows against sterling.

Charu Chanana, chief investment strategist at Saxo, said the rate check style warning could help reset positioning and remind the market there’s a line near 159–160.

"With the dollar starting to look softer, this is actually a cleaner window for Japan to lean against yen weakness. Intervention works better when it’s going with the broader USD tide, not fighting it."

The dollar index, which measures the US currency against six rivals, was hovering near its four-month low at 97.224 after dropping 0.8 percent on Friday in its biggest one-day drop since August.

Investor focus this week will also be on the Fed. The central bank is expected to hold rates steady at a meeting overshadowed by a Trump administration criminal investigation of Fed Chair Jerome Powell, whose term ends in May.

In commodities, oil prices eased slightly after rising about 3 percent on Friday, with traders weighing the impact of Trump pressuring Iran through more sanctions on vessels that transport its oil.

Brent crude futures eased 0.18 percent to $65.74 a barrel, while US West Texas Intermediate crude slipped 0.2 percent to $60.92 per barrel.

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