The yen fell on Thursday after the Bank of Japan governor said it was too early for the central bank to raise rates from near zero, suggesting rates in Japan would continue to lag those in the United States and the euro zone.
BOJ Governor Toshihiko Fukui's comments, coming after the central bank abandoned its super-loose monetary policy last week, drove the yen down to the day's lows against the dollar and the euro.
"The yen was sold off on a knee-jerk reaction," said Junya Tanase, forex strategist at J.P. Morgan Chase. "But Fukui's comments aren't that surprising, given that he has never said that rates would start to rise soon."
The spotlight was a firmly trained on rate outlook, with the dollar near a six-week low against the euro as the market vacillated over how long the US currency can maintain its rate advantage.
The dollar was at 117.85 yen, up around 0.4 percent and near the day's high of 117.89 yen touched shortly after Fukui spoke.
The euro was at 141.90 yen after climbing to 141.96 yen.
After three straight days' of gains, the euro was softer at $1.2045 but close to $1.2094. The euro's rise above that level would mark a six-week high.
The euro was supported against the dollar after a US Treasury Department report on Wednesday showed that net capital inflows into US assets in January were less than the amount needed to finance that month's record trade deficit.
A prime lure for such inflows has been rising US rates, but the dollar was bruised this week by doubts about how much further the Federal Reserve will tighten policy.
"The market has almost taken it for granted that the Fed is going to raise rates in March and May. That's why it's overreacting to disappointing numbers," said the chief trader at a European investment bank in Tokyo.
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