NEW YORK—The dollar fell to its lowest level against the yen since Japan's massive mid-September intervention to put a brake on its currency's rise; a plunge in U.S. consumer confidence figures pushed the greenback lower.
The euro gained against the dollar, as disappointing U.S. economic data solidified the case for a fresh round of stimulus from the Federal Reserve to kick-start a sagging U.S. economy, analysts said.
In recent trade, the euro was at $1.3490 from $1.3471 late Monday. The dollar was at 83.92 yen from 84.22 yen, while the euro was at 113.20 yen from 113.25 yen. The U.K. pound was at $1.5767 from $1.5850. The dollar was at 0.9737 Swiss francs from 0.9857 francs.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 79.344 from 79.502.
U.S. consumer confidence fell sharply in September, as consumers saw no improvement in the labor markets, according to a report released Tuesday. The Conference Board, a private research group, said its index of consumer confidence fell to 48.5 this month from a revised 53.2 in August, first reported as 53.5. The September reading was far worse than the 52 expected by economists surveyed by Dow Jones Newswires. It is the lowest reading since February 2010.
After the poor data, the dollar fell to its lowest level against the yen since the massive mid-September Japanese intervention to stem yen strength, dipping to 83.83 yen.
Investors are on alert for Japan returning to the market to prop up the dollar, especially as the Sept. 30 half-way point for Japan's fiscal year looms, with Japanese companies likely to be repatriating funds. Analysts said there were no signs of Japan in the market after the dollar's drop.
"The [Bank of Japan] is fighting data like this," said Alan Ruskin, global head of G10 foreign exchange strategy at Deutsche Bank in New York, of the weak U.S. figures, that led investors out of the dollar and into the yen. "The BOJ is basically fighting a broader dollar trend," making it difficult to fight the yen's rise, he said.
The common currency benefited from continued speculation the Fed would engage in a fresh round of asset purchases, known as quantitative easing, even as investors mulled a Wall Street Journal report that suggested the scale of the program could be smaller and more targeted than had been expected.
"It's up to the data to disprove the case for QE," said Mr. Ruskin. "Data like we've just had only go on to prove the case for QE."
The euro earlier shot to its highest level since April against the dollar, riding on the coattails of the U.K. pound's sharp decline after a monetary policy official suggested a fresh round of economic stimulus to prop a slowing U.K. economy.
The U.K. pound dropped sharply after Bank of England Monetary Policy Committee member Adam Posen's comments Tuesday that he sees a "clear" case for undertaking more asset purchases in the U.K. to avoid a Japan-style protracted period of economic underperformance.
The pound's drop against the euro also helped drag the common currency higher against the greenback, sending the euro to $1.3513, its strongest level since April, said John McCarthy, manager of currency trading at ING Capital Markets in New York.
—Natasha Brereton in London and Kathleen Madigan in New York contributed to this article.
