The euro retreated to $1.4038 in Tokyo morning trade from 1.4100 in New York overnight. The unit also fell to 115.18 yen from 115.50.

The dollar edged up to 82.05 yen from 81.91.

Investors moved to lock in profits after the euro rose overnight in the wake of positive German economic data.

German business sentiment has been steady in May after two months of falls, the closely-tracked Ifo index showed Tuesday as growth broadened with stronger domestic demand in Europe's biggest economy.

"Following its resilience, the euro's topside was capped by the eurozone sovereign debt woes, which are unlikely to be resolved soon," said Tomohiro Ishikawa, dealer at Chuo Mitsui Trust and Banking.

The yen slightly gained against the dollar and the euro after Japan's trade deficit turned out to be smaller than expected, dealers said.

"The yen temporarily drew buying, but the reaction to the data proved limited," Ishikawa said. "The dollar later climbed above 82 yen on real demand-backed purchases."

Japan plunged into a trade deficit in April as exports tumbled 12.5% year on year due to supply chain disruptions after the March 11 earthquake and tsunami, official data showed Wednesday.

Japan logged a deficit of 463.7 billion yen ($5.6 billion) in April, reversing a year-before surplus of 729.2 billion yen. The deficit, however, was smaller than the market average forecast of 700 billion yen.

"The main reason behind the result was that imports were weaker than expected," Barclays Capital chief Japan currency strategist Masafumi Yamamoto told Dow Jones Newswires.

"But the outcome eased investor concerns that Japan's trade balance may worsen rapidly" Yamamoto said.

He noted it is still possible that Japan could log bigger deficits down the road, "so investor attention on the data will remain high for now."

Copyright AFP (Agence France-Presse), 2011