The dollar slid to its lowest in over two months against the yen on Thursday as economic data reinforced optimism over Japan's recovery and lifted Tokyo's stock market to an eight-week high.
The US currency also fell against the Swiss franc as an explosion near a hotel in Ankara where President George W. Bush is due to stay encouraged investors to take refuge in safe-haven assets.
The dollar stood at session lows around 107.40 yen at 1145 GMT, its lowest since mid-April and down one percent on the day. It was also down half a percent against the Swiss franc, at 1.2468.
"The Ankara blast sparked a wave of risk aversion trades which knocked the dollar lower against the Swissie and the euro," said Adam Cole, senior currency strategist at Royal Bank of Canada Capital Markets.
In the bigger picture, however, Cole reckoned the dollar's slide against the yen was more important.
"We continue to get upside surprises from Japan and this is supporting flows into Japanese assets from abroad," he said. Data on Thursday showed confidence at Japanese firms was high in the latest quarter while activity at service industries surged.
The upbeat economic news lifted the yen to a two-month high against the euro at 130.12. The euro was up a third of a percent on the day against the dollar, at $1.2134.
News of the blast in Anakara triggered knee-jerk selling of the dollar, which has been vulnerable to global security concerns ever since the attacks on the World Trade Center in September 2001.
The device was hidden in a package at the entrance to the Hilton Hotel, where Bush is due to stay on Saturday before talks on Sunday with Turkish Prime Minister Tayyip Erdogan and President Ahmet Necdet Sezer.