The US dollar struggled to recover from a sharp drop against the yen yesterday, after dealers feared that comments by US Treasury Secretary Robert Rubin signalled a reversal in Washington's currency policy. After saying Japan had done much to cut its trade surplus with the US and that such an effort should not be reversed, the dollar fell to 121.35 yen. It recovered to 122.31-122.41, from its European close of 122.6 yen. The dollar's fall was further exacerbated by comments from Japanese Prime Minister Ryutaro Hashimoto that he wanted to see a stronger yen. Downward pressure had also materialised after the release of the Bank of Japan's quarterly tankan survey - which measures the mood of major manufacturers - and showed the first positive reading since November 1991. The possibility of increased trade tensions between the two countries appeared to loom large in the market yesterday particularly as Mr Rubin prepares to visit Japan this week, armed with possible demands for further concessions to ease the surplus. Bank of America economist Deborah Reid said the US was unlikely to change its general stance of wanting an overall strong dollar, and that comments to this effect should see the currency rise again. 'I don't see [Mr Rubin] changing his stance,' she said, emphasising that the US was keen to ensure that any appreciation of the dollar was also not too advanced. 'I think 125 yen is the limit they are looking for,' she said. Barclays de Zoete Wedd chief currency economist Brian Martin said in the near term the dollar would appreciate again because it was still very unlikely that the Bank of Japan would raise interest rates.