The yen rallied broadly on Tuesday on news the Japanese economy grew faster than expected in the first three months of 2004 while the euro took a hit from signs of souring German economic sentiment.
Japan's January-to-March real growth rate of 1.4 percent versus the previous quarter beat the 0.9 percent market forecast and calmed some fears that soaring oil prices and rising US interest rates could dampen the country's export-led recovery.
This lifted the yen above recent multi-month lows against the dollar and the euro, while the single currency came under additional pressure after the ZEW gauge of German economic optimism fell to its lowest since last July.
"The ZEW pulled the euro back. When you see headlines like 'it's the lowest since last July' on an intra-day basis it is going to affect people's short-term positioning," said Ian Gunner, head of foreign exchange research at Mellon Financial Corporation.
"The decent bit about the Japanese numbers was the fact that the consumption sector contributed a fair amount to the overall growth, which suggests the recovery is not entirely export-led."
At 1150 GMT, the yen traded 0.56 percent higher at 113.75 per dollar and 3/4 of a percent higher at 136.35 per euro.
The dollar - which on Monday suffered its biggest one-day fall against the Swiss franc since January - traded a touch firmer at 1.2780 francs.
The euro fell a quarter of a percent on the day to $1.1985. On Monday, the euro leapt more than one percent to a 10-day high.
The latest leg of euro weakening came after news the ZEW institute's main index fell more than expected to 46.4 in May from 49.7 the previous month.
"We had some weak economic data from Germany which is clearly negative for the euro. The yen was up after very strong GDP numbers. But we are not expecting a sharp downfall in the euro from here given geopolitical concerns," said Carsten Fritsch, currency strategist at Commerzbank in Frankfurt.
Eurozone April inflation came out in line with forecasts at 2.0 percent, bang on the European Central Bank's target ceiling.