The dollar sank to a one-year low against the euro and an eight-month low versus the yen on Friday, slammed by worries about a near-term end to Federal Reserve rate increases and widening US deficits.
Data showing US retail sales posted a surprisingly small gain in April gave investors more reason to think the Fed will pause a two-year credit tightening campaign in June after lifting overnight rates to 5 percent this week.
The Fed indicated it still has a bias toward raising rates further but expects economic growth to slow towards year end.
At the same time, the European Central Bank is expected to lift rates by 25 basis points to 2.75 percent next month, while a rate rise in Japan - where rates have hovered near zero for about five years - is expected in the third quarter.
The dollar was down around half a percent at 110.10 yen after earlier slipping to an eight-month low of 109.93 yen on electronic trading platform EBS.
The euro was at $1.2865, not far off the one-year high of $1.2876 struck earlier. Against the Japanese currency, the euro slipped to 141.65 yen from around 142.10 yen.
Sterling traded at $1.8870 after punching as high as $1.8886, according to Reuters dealing data, the highest in a year.
Rapid yen strength has been weighing on Japanese stock prices due to the threat it poses to exporter profits. The Nikkei share average ended trade down 1.5 percent at an 8-week low.
Over the past month the yen has surged more than 7 percent, prompting Japanese officials to step up warnings on Friday that such strength could hurt the economy's recovery from deflation.
Finance Minister Sadakazu Tanigaki said that big currency swings could have adverse affects on corporate profitability, while Economics Minister Kaoru Yosano said there were both good and bad aspects to a stronger yen.
"To Japanese authorities, yen appreciation is not good for Japanese equities and corporate profits. Their wording is strengthening a bit," said Kikuko Takeda, currency strategist at Bank of Tokyo Mitsubishi-UFJ.
But some traders pointed out that authorities stayed away from the market when the dollar fell below 105 yen in late 2004 and early 2005, adding that intervention was unlikely until the currency slides to around 100 yen.