The dollar turned higher against the yen on Tuesday as U.S. stocks trimmed losses late in the afternoon on talk of a bail-out for bond insurer Ambac.
The dollar rose as high as 103.37 yen, well off a three-year low at 102.62, according to Reuters data.
"Stocks and yen crosses are bouncing back on news that the Ambac bailout deal is progressing. The first report of this saw stocks recover 50 points from lows," one trader said.
Fears of a recession in the United States stemming from the subprime mortgage crisis have hammered the dollar in recent days, driving it to successive record lows against the euro and pushing it close to the psychologically important 100-yen mark.
The dollar was up against the yen after dipping to three-year troughs of 102.59 yen the previous session.
Remarks by Jean-Claude Juncker, chairman of the Eurogroup of finance ministers, that the euro was overvalued against other currencies, halted the common currency's five-day run of record highs versus the dollar.
The euro was steady against the dollar, off the $1.5275 all-time high set on Monday, according to Reuters data. The single euro zone currency also retreated from record highs versus sterling.
Against the yen, the euro declined.
"I think that's a step in the direction of becoming more worried about the euro," said Johan Javeus, FX strategist at SEB in Stockholm. "The market hasn't completely re-evaluated the situation based on these statements, but they have taken the edge off some of the euro strength we've seen recently."
The euro has gained nearly 3.5 percent against the dollar in the past week on expectations the Federal Reserve will keep cutting interest rates aggressively to fend off a recession.
There was little reaction to Fed Chairman Ben Bernanke's comments that further home price declines were likely and that delinquencies and foreclosures could continue to rise for a while.
The dollar rose against the Loonie after the Bank of Canada cut interest rates by 50 basis points.