The dollar slipped towards a two-month low against the yen on Thursday and was mired near a 5-1/2-month low against the euro in subdued trading due to holidays in both the US and Japan.
The US currency took a beating the previous day as investors rushed to cut back on risky positions in their portfolios before the holidays, sparking a broad-based sell-off that was exaggerated by relatively thin conditions.
The dollar tumbled more than 1 percent against both the yen and Swiss franc, the lowest yielding of major currencies that many investors have sold as a source of funds to buy higher-yielding currencies in the carry trade.
The yen edged up against most major currencies as more market players trimmed back short positions, but traders said they did not expect a renewed slide in the dollar in the near term. Carry trades have been profitable this year as currencies have been mostly confined to narrow ranges. Sharp bouts of volatility typically wipe out returns earned on the differences in interest rates in carry trades. Japanese financial markets were closed for the Labour Thanksgiving holiday, while the US market will also be closed for Thanksgiving.
Some analysts cautioned about reading too much into Wednesday's move since it happened on the back of no real change in the outlook for the US economy or Federal Reserve policy. The big event of an otherwise quiet day is the November Ifo survey of German business sentiment.
In a Reuters poll, the median forecast of economists was for a slight dip to 105.2 from 105.3 the previous month but still near a 15-year high hit in June.
The dollar dipped slightly to 116.55 yen after sliding as low as 116.36 yen on Wednesday, the weakest since late September. The euro slipped to $1.2933 from near $1.2945 in late New York trade, down from the high of $1.2958 - its best since early June. Analysts said any euro rise through this year's peak of $1.2980 would likely trigger a move above $1.30 and even higher.
"The trend for euro/dollar is up, and there is a possibility of breaking $1.30 in December," said Sharada Selvanathan, a currency strategist at BNP Paribas in Singapore.
Against the yen, the single currency shed 0.2 percent to 150.75 yen, pulling away from its all-time high of 151.68 yen struck earlier in the week. The dollar edged up to 1.2270 Swiss francs after striking a 3-month low of 1.2255 francs.