TOKYO, Japan - The yen's sharp rise showed signs of losing steam on Monday as speculation grew that Japan may intervene in foreign exchange markets to stem the currency's rapid gains, dealers said.

The dollar stayed at 13-year lows against the yen, falling as low as 91.86 in early Tokyo trade. The dollar edged back to 93.90, although it was still lower than the 94.24 reached in New York late Friday.

The euro tanked to $1.2580 from $1.2623 and drifted lower to a six-year low of 118.04 yen from 118.98.

The yen has been rising as investors seek cover from turmoil on financial markets by unwinding holdings in the currency of Japan, which has the developed world's lowest interest rates.

The trend continued "but the currency is rising at a more sluggish pace," said Masatsugu Miyata, forex strategist at Hachijuni Bank.

That was due to speculation that the Japanese central bank may cut interest rates or intervene in money markets to depreciate the yen.

The Japanese yen has risen more than 10 percent in the past week against the dollar and nearly 13 percent against the euro as fears of a global recession batter global equities markets.

"Traders are scared right now, and they are all expecting the Bank of Japan to intervene if the yen breaks the 90-yen level. Precaution against a central bank intervention is what is keeping the yen's rise in check," Miyata said.

Fuelling speculation that the government may also take action, Finance Minister Shoichi Nakagawa said that exchange rate movements have been "excessively volatile" and that he will closely watch them.

Japan's monetary authorities have not intervened since March 2004, allowing the yen to find its own level against the dollar.

The Reserve Bank of Australia intervened over the weekend to prop up the local currency. The high-yielding Aussie dollar has plunged during the global financial crisis.

Speculation has also grown of another round of coordinated interest rate cuts by the world's major central banks to shore up economies.

The US Federal Reserve is expected to cut its benchmark lending rates by at least 25 basis points on Thursday, ahead of the release of third quarter gross domestic product which is expected to have fallen.

"In the absence of any circuit breaker to the continuing slide in sentiment towards global economic growth and commodity prices, further falls are likely," wrote NAB Capital strategist John Kyriakopoulos in a note to clients.

"There’s also growing speculation of coordinated central bank intervention to weaken the dollar, especially since the slide in emerging market currencies threatens a string of corporate and sovereign debt defaults, which would hurt banks in the West," he added.