The yen fell broadly on Monday as more grim Japanese economic data intensified worries about the severity of the downturn facing the country, while equity market falls caused the euro to dip against the dollar.
Japan swung to its first current account deficit in 13 years in January as the global recession crushed export demand and income from overseas investment.
A deepening downturn in Japan has taken the shine off the Japanese currency's attraction as a safe-haven currency in recent weeks, taking the dollar back within sight of the key 100 yen mark.
"The yen is likely to remain weak, particularly as we head into the fiscal year-end, and since the Japanese authorities have indicated that they want the currency to weaken," BNP Paribas currency strategist Ian Stannard said.
Meanwhile, the dollar gained against the euro as weak equity markets left the single currency struggling to correct recent sharp falls, which took it to its lowest level versus the dollar in more than three months last week.
European shares quickly turned firmly into negative territory to trade down 1.0 percent on renewed banking sector concerns.
Lloyds led banking shares down after it said over the weekend that the UK government would get a stake of up to 77 percent in the bank after agreeing to underwrite 260 billion pounds of risky assets. For European share report click.
At 0844 GMT, the dollar gained 0.3 percent against the yen to 98.67 yen, while the euro also rose 0.2 percent to 124.59 yen.
Against the dollar the euro dipped 0.1 percent to $1.2627.
Ongoing aversion to risk due to fears about the global economy left those currencies perceived to be higher risk particularly vulnerable, with sterling down 0.7 percent at $1.3982 and the Australian dollar down 0.4 percent at $0.6379.
Later this week analysts will be looking out for trade and industrial production data out of China, with any sign of weakness likely to benefit the dollar, analysts said.
"Disappointment from this week's numbers (out of China) would … presumably send risk aversion once again higher. In this situation it is difficult to see the dollar losing traction given its credentials as safe haven," Commerzbank analysts said in a note to clients.
