The yen and the dollar strengthened on Thursday, buoyed by their perceived safe-haven status as investors fretted about global economic heath, while sterling stayed under pressure on banking and economic woes.
European shares gained 0.6 percent as they rebounded from recent losses, but this failed to dent the yen, which held near a 13-1/2-year peak against the dollar and a seven-year high versus the euro reached on Wednesday.
Gains in the Japanese currency were limited, however, as officials kept investors on alert for possible intervention, while Swiss officials issued similar warnings after recent strong rises in the Swiss franc.
"We are still in a very elevated risk averse environment, which is fuelling gains for the yen and the dollar," BTM-UFJ currency economist Lee Hardman said.
The pound remained firmly out of favour meanwhile after plunging to 23-year lows against the dollar on Wednesday on worries about the parlous state of the UK banking sector and government finances.
A grim economic outlook also weighed on the euro, as data showed eurozone industrial new orders tumbled 4.5 percent in November from the previous month, a much larger decline than expected. Euro sentiment has been dented by three rating downgrades of eurozone countries within a week. S&P cut Portugal's sovereign rating on Wednesday after downgrading Spain and Greece.
By 1235 GMT the dollar was down 0.7 percent at 88.82 yen, but off Wednesday's low of 87.10 yen, the lowest since July 1995. The euro dropped 1 percent to 115.42 yen, falling back towards the seven-year trough of around 112.08 yen. Against the dollar, the euro lost 0.3 percent to $1.2996.
Sterling dropped 1.5 percent to $1.3767, not too far from the trough of $1.3620 reached on Wednesday, its lowest since 1985. The euro also gained 1.2 percent against the troubled UK currency to 94.40 pence. The pound has come under severe pressure this week as a government rescue package for struggling British banks failed to reassure investors or stem losses in banking stocks.
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