The yen was under pressure in Asia Wednesday as markets bet on more easing measures after a Bank of Japan (BoJ) policy meeting, while the euro won support from positive eurozone news.
In afternoon Tokyo trade the dollar was quoted at 84.34 yen, from 84.28 yen in New York trade late Tuesday, while the euro also strengthened to 111.66 yen from 111.47 yen.
The European single currency bought $1.3242 from $1.3225 in US trade, thanks to a strong Spanish bond auction and an upgrade to Greece's credit rating.
Markets were focusing on the end of a two-day Bank of Japan policy meeting on Thursday, said Daisaku Ueno, senior forex strategist at Mitsubishi UFJ Morgan Stanley.
The greenback has won a measure of support on rising optimism about a deal to avert the US fiscal cliff.
Japan's incoming prime minister Shinzo Abe, whose Liberal Democratic Party swept to an electoral victory in elections Sunday, has vowed to step up pressure on the central bank for more aggressive action to boost the economy.
The hawkish LDP head wants the bank to set a two percent inflation target as part of a goal to drag Japan out of the deflationary spiral that has haunted it for years.
The BoJ "cannot ignore the popular support for Mr Abe", Ueno told Dow Jones Newswires. "It's likely the central bank will implement some form of easing."
Data Wednesday showed Japan's November trade deficit expanded nearly 38 percent year-on-year to $11.3 billion, a record for the month, in a worrying sign for the economy.
Abe's central bank pledge has weighed on the yen as traders bet that an LDP victory would increase the likelihood of more central bank easing, and usher in the appointment of a like-minded BoJ governor after current chief Masaaki Shirakawa's term ends in April.
Supporting the euro, Standard & Poor's raised Greece's sovereign debt rating by six notches on Tuesday following a burst of support for cash-strapped Athens from its eurozone partners.
Spain's borrowing rates, meanwhile, eased in a sale of short-term sovereign bills, giving it more breathing room to sort out whether to take a bailout.
The dollar was mostly stronger against other Asia-Pacific currencies.
It was at 1,072.30 South Korean won from 1,071.74 won on Tuesday, at 41.06 Philippine pesos from 41.02 pesos, at 30.60 Thai baht from 30.57 baht, at 54.80 Indian rupees from 54.75 rupees and at 9,719 Indonesian rupiah from 9,672.
The greenback slipped to Sg$1.2191 from Sg$1.2196 while it was flat at Tw$29.04.
The Australian dollar eased to US$1.0515 from US$1.0541 while China's yuan bought 13.50 yen from 13.46 yen.