A delay in nominating a Bank of Japan governor has fanned talk of friction between Japan's prime minister and finance minister over who should run a central bank charged with taking aggressive action to beat deflation.
Japan's trade data due at 2350 GMT is shaping up to be the next focal point with a weak outcome likely to bolster efforts to reflate the economy.
The dollar, which has gained around 8 percent on the yen this year, stood at 93.55 having retreated from Monday's high of 94.22. But it still remained near a 33-month peak near 94.47 set on Feb. 11.
The euro bought 125.20 yen after recovering from a dip to 124.56, in part thanks to a closely watched ZEW survey showing a jump in German investor and analyst sentiment to three-year highs.
That upbeat data also helped lift the euro against its US counterpart, pushing the common currency to a near one-week high of $1.3396. It was last at $1.3385.
The ZEW report is a positive sign ahead of the more important euro zone flash PMIs on Thursday and Germany's IFO business sentiment on Friday, said Vassili Serebriakov, a strategist at BNP Paribas.
"We therefore continue to view any pullbacks in EUR/USD as corrective, with support coming from the November bullish daily trendline currently at 1.3280. We expect EUR/USD to rally to 1.3800 by the end of Q1," he said.
Against sterling, the euro touched a two-week high at 86.85 pence. Investors gave the pound a wide berth partly on growing speculation the UK could soon lose its prized triple-A credit rating.
The market was also waiting for minutes of the Bank of England's latest policy meeting, looking for signs on whether policymakers will continue to tolerate above-target inflation and a weaker pound.
Sterling traded at $1.5424, having plumbed a seven-month low at $1.5414 in New York.
Commodity currencies like the Australian and New Zealand currencies fared much better, with the Aussie dollar popping back above $1.0300. Still, it remained contained a slim $1.0200/0400 range seen for most of this month.
Christopher Vecchio, currency analyst at DailyFX said a fall below $1.0260/70 would be needed to confirm a breakdown. "With the downtrend swing highs coming in at $1.0460/80, our bias remains bearish against this zone. A break above implies a rebound back towards the highs above 1.0600."
Partly supporting the Aussie, minutes of the Reserve Bank of Australia Feb. 5 policy meeting out on Tuesday suggested the central bank was in a wait-and-see-mode, rather than seeking to actively cut interest rates.