A steep slide in Japan's Nikkei and doubts over U.S. Federal Reserve stimulus and Japan's recovery led foreign investors to unwind hedges taken out to benefit from rising stocks and avoid being hurt by a weaker yen.
"This week's BOJ meeting, which offered no new policy initiatives or stimulus programs was the catalyst for the rapid change in sentiment in the foreign exchange market," said Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management in New York.
The yen rose as high as 93.78 against the dollar, the strongest since April 4 after Japan's Nikkei share index closed down 6.4 percent. The dollar last traded at 95.36 yen, down 0.7 percent on the day.
Japanese equity futures, with which dollar/yen has been closely correlated in recent weeks, were also down around 2 percent, while European shares traded lower.
Given that the Nikkei has provided a lead on dollar/yen trading there is nothing to stop the bearish price action in the near term, according to BNP Paribas.
"We think this rout will eventually provide good opportunities to sell yen if you believe the power of policymakers in determining markets," the firm said.
Analysts said the yen, which rises in times of financial turmoil, was gaining on worries that the aggressive policies of Japanese Prime Minister Shinzo Abe were yet to boost the economy and stave off deflation.
(Read More: Yen Surges as Safe-Haven Bid Back in Play)
"The dollar squeeze in the last few days, despite stronger U.S. yields, has left a lot of market participants dazed and confused," said Alvin Tan, foreign exchange strategist at Societe Generale.
"The best explanation we can offer is that there is a broad squeeze in market positions, and we started this risk-off move with a market that was long dollars."