The euro retreated on Friday and hit a one-month low against the dollar, dented by uncertain prospects for the euro zone's economy and monetary policy.
The euro lost ground against the yen as well, helping the Japanese currency gain broadly.
The euro's fall accelerated after European Central Bank President Jean-Claude Trichet said in Tokyo on Friday that the ECB must balance the need for immediate action to tackle the credit crunch with a sound exit strategy for such policies.
Market participants said Trichet's comments contained no big surprises but still triggered selling of the euro, which has steadily declined since touching a two-month high of $1.3739 in March.
"The ECB is widely expected to adopt non-traditional easing policies at the next policy meeting in May. Expectations are also high that it will cut interest rates to 1 percent (from 1.25 percent)," said Takahide Nagasaki, chief forex strategist at Daiwa Securities SMBC.
"Though Trichet's comments today provided few surprises, he also seemed to suggest he does not want to cut rates further after May. Such a stance may not work in the euro's favour as it casts doubt on the euro zone's economic recovery prospects," Nagasaki said.
The euro fell 0.6 percent to $1.3102 after hitting a one-month low of $1.3065 on trading platform EBS.
The euro shed 0.4 percent to 130.35 yen, reversing early gains.
"The euro climbed against the yen in early trade then quickly lost steam. It looks as if market players took Trichet's comments as an excuse to sell after concluding its rise had peaked," said Mitsuru Sahara, chief manager of currency derivatives trading at Bank of Tokyo-Mitsubishi UFJ.
The market is focusing on data such as the German Ifo indicator of business sentiment due next Friday for clues to the euro zone's economic health.
The euro's broad decline shored up the yen against the dollar, limiting its fall. The dollar edged up 0.2 percent to 99.490 yen.
Analysts said investors remain cautious of holding positions for very long, given uncertainty about the prospects for economic recovery in the United States and other big economies. As a result day-to-day trading was choppy.
"It is speculators and intraday trading which are running the market action," said Sue Trinh, senior currency strategist at RBC Capital Markets in Sydney.
"But if you take a step back, we are in a very wide range overall with a very modest bias towards risk appetite on a one-month time frame."
The currency market was waiting to see earnings from Citigroup expected later in the day after better-than-expected results from JP Morgan the previous day added to hopes of bank sector stabilisation.
The Australian dollar rose as high as 71.95 yen early on but later trimmed most of its gains to 71.56 yen. It edged down 0.1 percent to $0.7195 after losing 1 percent on Thursday.
