By Emelia Sithole-Matarise
U.S. crude futures also fell, by 0.7 percent, as a stronger dollar made commodities priced in the greenback more expensive for investors holding other currencies, thereby cooling demand.
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The dollar rose 4 percent against the yen to 78.35, bouncing off a record low of 75.31 yen. The dollar <.DXY> was last 76.040 against a basket of six major currencies, up 1.3 percent.
The dollar came under pressure as investors cautiously returned to riskier assets such as equities after Europe's leaders laid out a basic framework to tackle the sovereign debt crisis last week.
Japanese Finance Minister Jun Azumi said Japan intervened unilaterally in the foreign exchange market on Monday to counter speculative moves that did not reflect the health of the Japanese economy.
"If the Bank of Japan wants to avoid the dollar slipping back quickly toward 76 yen very soon they will need to come in again to really make the point," said Niels Christensen, currency strategist at Nordea in Copenhagen.
Noting that the last intervention in early August also had a significant effect on dollar/yen, which then very quickly dropped back down again, he said the authorities might want to avoid that happening this time.
The euro slipped almost 1 percent versus the dollar to $1.4014.
The single currency reached a seven-week high around $1.4247 last Thursday following news of the debt rescue plan, and looked set to end the month up nearly 5 percent for its best monthly performance in just over a year.
But speculation about a possible interest rate cut on Thursday by the European Central Bank could limit its upside for now.
Equities gave back some of last week's gains as the decline in metal prices on the back of the dollar's rise hit mining stocks.
The MSCI world equity index was up 1 percent after posting its best week in nearly three years as the European plan to resolve the debt crisis spurred a relief rally.
European stocks <.FTEU3> were down almost 1 percent, after rising 4.1 percent last week, while emerging stocks were 0.65 percent lower.
"The main overnight news was the Bank of Japan intervening on the foreign exchanges. The correlation (between the euro and European equities) ensures a weak start for equities," Jeremy Batstone-Carr, strategist at Charles Stanley, said.
He also pointed to doubts about the euro zone plan. "Last week we saw a huge rise in equity markets largely on the revelation of a structure of a plan, with no detail on the funding."
U.S. and German government bonds advanced as equities declined, with initial euphoria over Europe's plan to contain the two-year crisis also waning as doubts about its efficacy set in.
German Bund futures rose 69 ticks to 134.35 while U.S. T-note futures were up 10/32 at 128/12.5/32.
The past week's meeting of euro zone leaders left unclear how the fund -- the European Financial Stability Facility -- was to increase its firepower, a key part of the agreement.
Investors are wary that a summit this week of leaders from the world's 20 leading economies may disappoint with a lack of further details on plans for the rescue fund.
The meeting will also be watched for coordinated efforts or pledges to help stabilize world financial markets, which have been battered this year by the euro zone debt crisis and a slowing world economy.
(Additional reporting by Jessica Mortimer and Brian Gorman; Editing by John Stonestreet)