The yen lost more ground in Asian trade Friday, hitting a seven-month low against the euro as risk sentiment among investors turned up while markets eye progress in a simmering US budgetary impasse.
The dollar gained on the Japanese currency in midday Tokyo trade, buying 82.49 yen from 82.10 yen in New York late Thursday, while the euro fetched 107.27 yen, up from 106.58 yen in US trade and a new seven-month high.
Against the greenback, the 17-nation euro traded at $1.3001 from $1.2978.
The persistently strong yen, seen as a port in the storm from turmoil in Europe and a wobbly US economic recovery, has been losing steam in recent weeks.
It took a hit after Japan's main opposition leader Shinzo Abe vowed to pressure the Bank of Japan into more aggressive easing measures if he is elected as the country's prime minister at polls next month.
Abe has been widely tipped to defeat the government of Prime Minister Yoshihiko Noda, which on Friday approved an 880 billion yen ($10.7 billion) stimulus package ahead of the December 16 elections that his ruling party is widely expected to lose.
Daisuke Karakama, market economist at Mizuho Corporate Bank, said the yen's drop Friday may have stemmed from Japan's widening trade deficit rather than a specific piece of news.
"It's month-end and some people say what we are seeing today could be a result of the country's trade deficits," he said.
"We used to see dollar selling at month-end but the opposite may be happening now due to need for dollars to finance imports," told Dow Jones Newswires.
On Thursday, Republican speaker of the House of Representatives John Boehner said, after meeting with Treasury Secretary Timothy Geithner, there had been "no substantive progress" in talks over the so-called fiscal cliff of spending cuts and tax hikes.
The package is due to come into effect on January 1 and could throw the US into recession unless a deeply divided Congress agrees on a new budget deal.
"No matter, markets have shrugged off initial disappointment at Boehner's remarks, and evidently continue to travel hopefully in the expectations that a deal will get done before year end," National Australia Bank said in a note.
Forex markets reacted little to Japan posting a surprise 1.8 percent jump in its October factory output.