The yen hit a three-week low versus the dollar and an 8-week trough against the euro on Monday as expectations grew Japanese investors would buy higher-yielding overseas assets at the start of the new financial year.
The euro recovered some of its earlier losses against the dollar as news that the eurozone manufacturing sector expanded at its fastest pace in more than five years in March boosted expectations of gradual rate hikes by the European Central Bank.
In Japan, a closely-watched tankan survey showed business confidence among Japan's big manufacturers slipped unexpectedly in the three months to March, its first decline in four quarters, triggering the move lower in the yen.
"The dollar has got off to a good start for the quarter and the trigger was the yen," said Daragh Maher, currency strategist at Calyon.
"We had a soft tankan survey and that gave an excuse for (dollar buying) and fostered talk the Japanese are investing abroad at the new fiscal year. That gave self-fulfilling support for the dollar/yen."
By 1145 GMT the dollar was 0.6 percent stronger at 118.45 yen, having earlier hit a three-week high of 118.80. The euro was around 0.2 percent firmer at 142.86 yen, off an earlier eight-week high of 143.07.
Against the dollar, the single currency was down 0.5 percent at $1.2055, off the session lows of $1.2031.
The eurozone manufacturing PMI rose to 56.1 in March from February's 54.5 - its highest reading since September 2000 and beating the consensus forecast for a rise to 55.0.
"The PMIs are consistent with anecdotal evidence suggesting the eurozone recovery is gathering momentum and will reinforce the view that the next rate hike from the ECB will come sooner rather than later," said Audrey Childe-Freeman, economist at CIBC World Markets.
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