The inverse relationship between the Nikkei share index and the yen is one of the foreign exchange market's long established trends. Foreign players traditionally sell the yen to hedge purchases of Japanese shares while a stronger Nikkei typically makes Japanese investors more comfortable with investing abroad, also a negative for the currency.
The share index surged to a 3 percent daily gain on Wednesday on the back of Finance Minister Taro Aso's promise that "moves" by the $1.26-trillion government pension fund would become apparent from June.
That came amid rhetoric from Japanese officials read as generally cooling the prospect of more monetary easing in Prime Minister Shinzo Abe's push to drive up inflation and get Japan growing again.
"Some of the recommendations for the pension fund are going to be implemented shortly and that story would explain the move overnight," said Ian Stannard, head of European currency strategy with Morgan Stanley in London.
"But overall the risk is that we do get another setback (for the dollar) in the short-term. They're playing down the need for more policy action and that's going to leave the market quite disappointed and the yen well supported."
At 1.3839, it remained below levels seen before ECB President Mario Draghi's verbal intervention on the currency at the weekend, but just a cent off 2014 highs in a market already thinning out ahead of the Easter break.
"Quiet markets could see the euro drift up to 1.3850 and we imagine there are plenty of stops on short EUR positions near 1.3880," said Chris Turner, a strategist with Dutch bank ING in London.
"The focus (for the dollar) today will be on whether U.S. housing starts and building permits can rebound back to their highs, industrial production and also on Fed speakers."
Fed Chair Janet Yellen was due to speak on monetary policy and the economic recovery before the Economic Club of New York later on Wednesday.