The dollar was 1.37 percent lower against the yen at 107.38 yen, while the euro was 0.86 percent lower against the yen.
The yen has surged more than 5 percent in five weeks on mounting worries over the direction of the global economy.
"Clearly the Japanese yen is a beloved safe-haven asset when the globe seems to be in chaos," said Juan Perez, senior currency trader at Tempus Consulting, in Washington.
"Things are consistent in Japan though overall economic growth and certainly inflation have been anemic, but their political situation is stable, they carry a current account surplus, and the rest of the world seems more at the mercy of the US-China trade impasse," said Perez.
The yen has traditionally been the go-to currency in times of stress because traders believe the legions of Japanese investors holding money overseas will rush back into Japan when markets are in flux.
Earlier in the session, the yen rose to as much as 4.4 percent stronger versus the dollar after a flurry of automated orders triggered a massive move in thinly traded Asian markets.
"The time between New York close and Asian open is notoriously thin as it is and couple that with a Japan holiday and Apple news that smacked the equity and you had a nice recipe for a sharp JPY rally," Brad Bechtel, global head of FX at Jefferies, said in a note.
Investors were spooked by an Apple Inc warning about weak iPhone demand and stock markets fell globally. A break through key technical levels in dollar/yen markets in early Asian trading triggered massive stop-loss sales, forcing investors to unwind bets against the yen.
The dollar's recent weakness also reflects concern about the course of the US economy and a drastic shift in investor expectations for interest rate rises, with many now calling the end of the Federal Reserve's rate-hiking cycle, analysts said.
The dollar fell against the euro on Thursday after data from the Institute for Supply Management (ISM), showed the US manufacturing activity index at its lowest since November 2016, following its biggest monthly drop since October 2008.
The Australian dollar, whose fortunes largely depend on the Chinese economy to which Australia sends a bulk of its commodities, fell to a near-decade low before recovering to trade little changed on the day.
Sterling was 0.11 percent lower against the greenback as worries about the health of the global economy and particularly China prompted investors to avoid currencies considered riskier.
The Canadian dollar strengthened to a nearly two-week high against its US counterpart on Thursday as oil prices rose and the greenback broadly declined.