The yen rose on Wednesday as falls in share prices and worries about upcoming earnings results for big U.S. companies prompted investors to flock to its perceived safety.
The yen showed limited reaction to news that Japan's current account surplus halved in February from a year earlier as the global financial crisis took its toll on Japanese exports.
The dollar was also higher on safety bids although down against the yen, dealers said.
The U.S. and Japanese currencies, seen as safer bets than others in times of market stress, will likely keep drawing demand as investors stay away from riskier assets, dealers said.
Tokyo's Nikkei share average lost 2.8 percent, with banks under pressure after their U.S. peers fell on worries about toxic assets and ahead of the earnings season.
"The currency market moved back to risk aversion after optimism had gone a bit too far," said Yoshihisa Kanzaki, a currency dealer at Shinkin Central Bank.
"But the market overall is expected to be driven by investor position adjustments and profit-taking for the rest of this week ahead of a long weekend for many overseas players and before U.S. financial sector earnings," he said.
Japan's current account surplus fell 55.6 percent in February, slightly better than a market forecast for a 57.1 percent fall, after logging a record deficit in January.
"The data shows Japan's economy continues to deteriorate. But for the yen, returning to a surplus is a positive, because foreign investors saw last month's deficit as a reason to sell the yen," said Toru Umemoto, chief foreign exchange strategist at Barclays Capital in Japan.
The dollar slipped 0.5 percent to 99.96 yen. On Monday it hit a six-month high of 101.45 yen.
The euro fell 0.6 percent to $1.3197 and dipped 1.1 percent to 131.88 yen, after touching 137.42 yen on Monday, its highest since late October.
The European single currency came under selling pressure on Tuesday after data showed the euro zone economy recorded its deepest-ever quarterly fall in the fourth quarter of 2008.
Ireland unveiled on Tuesday an emergency budget including harsh spending cuts and tax hikes. It also said it would create an asset management company to buy up to 80-90 billion euros ($108 billion-$122 billion) of soured bank loans.
Analysts said that it was tough to gauge how much Ireland's move affected falls in the euro in Asia but that it could lead to the view that the nation's financial burden would increase.
Higher-yielding currencies such as the Australian dollar and the New Zealand dollar were weaker.
The Aussie slipped 0.6 percent to $0.7071 and fell 1.1 percent to 70.65 yen.
The Bank of Australia cut interest rates by 25 basis points to 3 percent on Tuesday -- a smaller cut than some had expected -- and said it saw scope for a "further modest adjustment" to rates.
The kiwi was down 0.5 percent at $0.5727 and dropped 1.0 percent to 57.27 yen.
