The yen slumped against other major currencies Thursday after a Japanese politician tipped to win election said he would press the central bank to ease monetary policy.
The euro, meanwhile, weathered widely expected news that the 17-nation eurozone entered recession in the third quarter.
The euro bought $1.2778 at 2200 GMT, up from $1.2734 at the same time Wednesday.
"Riskier positions are small, larger positions are being pared, and nimbleness is a virtue amidst growing uncertainties relating to the eurozone crisis," said Samarjit Shankar at Bank of New York Mellon.
The Japanese currency was under pressure after the ruling party of Japanese Prime Minister Yoshihiko Noda announced a national poll on December 16, bringing an end to months of speculation.
The euro leaped to 103.69 yen, from 102.19 yen late Wednesday, while the dollar surged to 81.16 yen from 80.23 yen.
The election is expected to be won by the Liberal Democratic Party, whose leader Shinzo Abe -- a former prime minister -- said Thursday he would seek more control of the Bank of Japan and push for unlimited monetary easing to spur the economy and lift inflation to 2-3 percent.
"If Abe wins the next election as expected then he is likely to reduce the BOJ's independence and force the bank to make more asset purchases and reduce interest rates," said Kathleen Brooks at Forex.com.
"Lower yields may weigh on the yen in the medium term," she added.
Traders digested lackluster economic data in the United States, including a pair of Federal Reserve reports on manufacturing in the northeast battered by Superstorm Sandy.
The dollar fell to 0.9423 Swiss francs from 0.9447 francs late Wednesday.
The pound fetched $1.5859, up from $1.5840.