The euro was stronger in Asia Thursday on optimism a long-sought bailout deal for Greece will be found, while the yen was under pressure amid speculation of further Bank of Japan easing measures.
In Tokyo, the European single currency fetched $1.2843 in mid-afternoon trade, up from $1.2826 in New York late Wednesday, while it bought 105.86 yen against 105.84 yen.
The dollar retreated from 82.59 yen in earlier trade -- its highest levels in about seven months -- to 82.41 yen, down from 82.51 yen in US trading.
The euro won support after European leaders said Wednesday that their third attempt in as many weeks to unblock bailout funds for debt-stricken Greece will likely succeed, as Athens warned that eurozone stability depended on it.
The yen, meanwhile, has been under pressure since Japan's main opposition leader Shinzo Abe, widely tipped to become prime minister after next month's general election, said he would press the Bank of Japan for aggressive monetary easing to boost the world's third-largest economy.
His comments have stoked further pressure for action by the BoJ, which held steady on launching fresh easing measures after a policy meeting this week.
But the bank's remarks about Japan's weakening economy and a string of poor economic data, including the worst October trade data in over 30 years, has sparked speculation it will launch new stimulus after its December meeting. Easing tends to weigh on the currency.
Traders also reacted to a mixed bag of US economic data, while awaiting a deal in Washington on avoiding the fiscal cliff of spending cuts and tax hikes that come into effect on January 1 and will likely tip the economy into recession.
Despite signs from US lawmakers that a new deal may be within reach, the dollar's recent advances against the yen could be wiped out unless a concrete remedy is found soon, dealers said.
"Specific and speedy progress is necessary to further lower uncertainty," Masafumi Yamamoto, chief forex strategist at Barclays in Tokyo, told Dow Jones Newswires.
"If that can't be seen, this could weigh on the dollar against the yen."
The dollar was mixed against other Asia-Pacific currencies.
It weakened to Sg$1.2247 in Tokyo from Sg$1.2264 late Wednesday, to Tw$29.13 from Tw$29.16, to 55.14 Indian rupees from 55.29 rupees and to 41.09 Philippine pesos from 41.19 pesos.
The greenback was also weaker at 30.71 Thai baht from 30.73 baht, but it rose to 1,084.70 South Korean won from 1,083.50 won and to 9,642 Indonesian rupiah from 9,637 rupiah.
The Australian dollar changed hands at $1.0382 against $1.0352, while China's yuan bought 13.22 yen from 13.09 yen.