The dollar languished close to a 13-year low against the yen on Thursday, pressured by doubts about whether US measures to boost the economy would bring quick relief, dealers said.
Japan's central bank meanwhile unveiled measures aimed at repairing battered credit markets by mopping up risky assets, warning that Asia's biggest economy faced a two-year recession.
In morning trading here, the dollar fell to 89.09 yen from 89.45 in New York late on Wednesday, when the US currency briefly touched 87.10 yen -- the lowest level since July 1995.
The euro rose to 1.3035 dollars from 1.3022 dollars in New York late on Wednesday.
"The yen is likely to continue gaining in the medium-term, as concerns over the financial system in the US and Europe remain," Akio Shimizu, chief manager of forex at Mitsubishi UFJ Trust and Banking, told Dow Jones Newswires.
The greenback risks falling below 87 yen if measures undertaken by President Barack Obama to revive the US economy fail to boost market sentiment, a dealer at a major Japanese currency broker said.
"The balance of power in the currency market has been so unstable recently. So if doubts over Obama's stance on the economy and markets emerge... players will have no choice but to buy the yen," he added.
Markets also remained worried over the confirmation of treasury secretary designate Timothy Geithner after he admitted having failed to pay income taxes, dealers said.
Geithner apologised Wednesday over past tax transgressions while vowing to act with "strength, speed and care" to revive the stricken US economy at a confirmation hearing before the Senate finance committee.
Markets were also worried about the health of the flagging British economy. Expectations were growing that the Bank of England would slash interest rates next month, bringing down its key lending rate to one percent from 1.5 presently.
On Wednesday sterling hit an all-time low against yen and a 23-year trough versus the dollar.
In London trading, the euro changed hands at 1.3035 dollars against 1.3022 dollars late on Wednesday, at 116.20 yen (116.49), 0.9396 pounds (0.9328) and 1.5081 Swiss francs (1.5019).
The dollar stood at 89.09 yen (89.45) and 1.1560 Swiss francs (1.1533).
The pound was at 1.3884 dollars (1.3957).
On the London Bullion Market, the price of gold increased to 850.25 dollars an ounce from 849.25 dollars late on Wednesday.
