The yen rallied to a 14-year high against the dollar on speculation Japanese monetary authorities will tolerate further appreciation of the currency.

Finance Minister Hirohisa Fujii said today the government needs to take action on abnormal currency movements. Earlier, Vice Finance Minister Yoshihiko Noda said the government isn't considering stepping into the currency market, Reuters reported. The Swiss franc fell against the euro and the dollar on speculation the nation's central bank sold the currency after it climbed to parity with the greenback yesterday for the first time in 19 months.

Fujii's comments failed to dispel views that Japan won't intervene immediately, said Yuki Sakasai, a Tokyo-based foreign exchange strategist at Barclays Bank Plc. Such a view makes it easier for traders to buy the yen.

Japan's currency rose to as high as 86.30 yen per dollar, the strongest since July 1995, before trading at 86.93 as of 8:38 a.m. in London from 87.35 yesterday in New York.

The dollar reached a post-World War II low of 79.75 yen on April 19, 1995.

I am watching these movements, right now it's time to watch them closely, Fujii told reporters in Tokyo today. We need to take appropriate action against abnormal movements.

Despite reported comments that ruled out intervention, we shouldn't be careless about this possibility, said Osamu Takashima, chief foreign-exchange analyst at Bank of Tokyo- Mitsubishi UFJ Ltd., a unit of Japan's biggest bank. The possibility of actual intervention may increase further if the yen approaches 80 and the euro rises to $1.60.