The U.S. dollar hit a 17-month low against the safe-haven yen on Tuesday on investor concerns about global economic growth, while the euro was set to post its first daily loss against the dollar in more than a week on soft European economic data.
The dollar extended its losses against the to 8.6 percent for the year, with a downturn in stocks and commodity prices fueling the latest rally in the Japanese currency. The dollar hit its lowest level since late October 2014.
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The dollar was last down 0.75 percent against the yen at 110.42 yen in U.S. trading. The dollar had weakened against the yen in recent sessions in the aftermath of Federal Reserve Chair Janet Yellen's dovish comments last week.
"The market is maybe giving up a little bit on the global growth story," said Thierry Albert Wizman, global interest rates and currencies strategist at Macquarie Limited in New York.
Traders cited huge options barriers at 110 yen, however, that could slow the greenback's drop in the short term.
Investors were cautious about driving the yen much higher given the risk of intervention by Tokyo, with many wondering how much appreciation Japanese officials will tolerate before they are forced to act and weaken the currency.
German factory orders and a subdued start to the euro zone's business activity in the first quarter weighed on the euro, while the currency briefly touched its session low against the dollar after Institute for Supply Management data showed a stronger-than-expected gain in the U.S. non-manufacturing sector in March.
"The concern is that going forward we will continue to see a loss of momentum in the euro zone," said Sireen Harajli, currency strategist at Mizuho Corporate Bank in New York.
The Australian dollar hit a one-week low against the greenback of $0.7511 as oil prices fell for a third straight session. Lower commodity prices tend to reduce inflationary pressures, causing a worry for policymakers in the developed world, who want to head off the threat of deflation.
The dollar index, which measures the greenback against a basket of six major currencies, was last up 0.13 percent at 94.63.