The yen firmed on Thursday after data showing a surge in Japanese machinery orders confirmed the view that Japan's economy was on the road to a sustainable recovery.
Japan's core private-sector machinery orders, a key gauge of trends in capital spending, rose 11.8 percent in April from a month earlier on a seasonally adjusted basis, government data showed, well above the median forecast of a 1.9 percent rise.
"It's certainly better than expectations, but we know the Japanese economy is in pretty good shape and in that sense it just reinforces the recent yen-positive data we've seen," said Tomoko Fujii, a market analyst at Nikko Citigroup.
The dollar dropped to around 109.64 yen after the announcement, 0.7 percent below its late New York level of around 110.43 and almost one yen below the day's high of 110.54. It had recovered slightly to 110.10.
The data came on the heels of figures on Wednesday showing that Japan's gross domestic product (GDP) grew by an annualised 6.1 percent in January-March - faster than the government's original estimate and outpacing a 4.4 percent expansion in the United States.
Some analysts said the Japanese currency was also benefiting from an easing in oil prices, which have pulled back around 11 percent from a 21-year high hit last week.
The yen also gained against the euro, which was under pressure from a spat among European leaders on monetary policy and speculation that the US Federal Reserve would raise interest rates more aggressively than previously thought.
The US Fed is holding overnight rates at a 46-year low of 1.0 percent, but it is widely expected to raise them by a quarter of a percentage point when it meets on June 29-30.
That would make dollar bonds more attractive and shrink the yield differential with the euro zone, where short-term rates sit at two percent.
The euro was near a two-month low against the British pound and a five-month low versus the Swiss franc
It was fetching around $1.2050 little changed from late New York levels.