The yen hit a six-month low against the dollar and a four-year trough versus the euro on Monday as a deal on Iran's nuclear programme sent shares higher, prompting investors to sell the low-yielding currency. The Japanese currency typically falls when share prices rise, with the greater appetite for risk leading some investors to sell the low-yielding yen in search of greater return.
It has also weakened recently on the belief the Bank of Japan will implement the most aggressive monetary stimulus among major central banks.
The dollar was up 0.5 percent at 101.74 yen, having hit 101.915 yen, its strongest since late May, as a deal between Iran and six world powers to curb Tehran's nuclear programme lifted Asian and European shares and pushed oil prices lower.
"The market perceives the (inverse) correlation between the yen and the Japanese Nikkei as strong... It's very much embedded in the market's psyche," said Jane Foley, senior currency strategist at Rabobank.
Positioning data last week showed speculators increased net short positions in the Japanese currency to their highest in six years.
Traders said some investors were reluctant to be short of dollars before Thursday's US Thanksgiving holiday. Demand was also seen from Japanese importers, as Monday was a "gotobi" date - a multiple of five - on which books are traditionally settled.
"The yen is being sold off as the funding currency of choice," said Jeremy Stretch, head of currency strategy at CIBC, adding the dollar could be heading towards 102.50 yen, a level last hit at the end of May.
The euro rose as far as 137.98 yen, its highest since October 2009. It was last up 0.15 percent at 137.43 yen.
It fell against the dollar, however, after European Central Bank Governing Council member Ardo Hansson said he saw more room for the central bank to cut interest rates.
The euro fell 0.35 percent to $1.3512, with analysts and traders also saying lower oil prices may exacerbate concern about disinflationary pressures in the euro zone.
It fell as low as $1.3399 last week after a media report suggested the ECB could opt for negative deposit rates.
ECB Executive board member Benoit Coeure said in Tokyo that slowing price growth, or disinflation, would continue for now, but would not progress to deflation.
Falling oil prices weighed on commodity-linked currencies, with the Canadian dollar hitting a 4 1/2-month low of C$1.0584 per US dollar. The US currency was last up 0.4 percent at C$1.0553.
The Australian dollar was down 0.2 percent at $0.9151, having hit a 2-1/2 month low of $0.9120 due to the threat of intervention by the Reserve Bank of Australia to stem the currency's recent gains.
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