The dollar rose against the yen in early Monday trading following last week's decision by the Federal Reserve to cut the discount rate.

Following the decision, the yen saw gains it had made on the dollar reversed slightly, sliding from last week's multi-month high of 116.60 to 114.65.

The yen also lost ground against the euro, as the single currency climbed to 154.65 yen after opening at around 153.40.

Masafumi Yamamoto, a currency economist at Nikko Citigroup in Tokyo, told Reuters: "The yen's rise may slow as fears about falling stocks ease after the Fed's action.

"But in the long run, the market will remain vulnerable to the unwinding of carry trades while bad news related to subprime mortgage problems is likely to surface more towards the year-end."

The discount rate is the interest rate that the Federal Reserve imposes on loans made directly to banks.

On Friday, the body moved to lower the rate from 6.25 per cent to 5.75 per cent, which has boosted the fortunes of the dollar.