As the dollar weakened Wednesday, oil and stocks rose. The S&P 500 was up 21 points at 2,066, helped by energy, and the Nasdaq, buoyed by a biotech rally, climbed 1.6 percent to 4,920. The dollar index was down 0.2 percent at 94.457.
"We think there's a bit more room to the downside. We have a target of 1.08 on dollar/yen," said Vassili Serebriakov, currency strategist at BNP Paribas.
"I think it's going to be a combination of risk deteriorating a little bit, and also U.S. real rates are low as the Fed remains dovish for now. We think that should keep the momentum going for dollar/yen,"
But it's the consequences of the currency moves that some strategists worry could become troublesome, and there's also concern about whether the move is a signal of something more dire for the global economy.
"Usually the yen is up when equities are down. So, we had a decoupling of that and now it's just a momentum trade," Boris Schlossberg, managing director, foreign exchange strategy at BK Asset Management, said.
Schlossberg said the yen usually strengthened when investors did not want to hold risky assets.
"The 110 was a very significant level it broke. It did a lot of technical damage. The yen is sort of toxic at this point…The sentiment is so sour, the market is very skittish," said Schlossberg.
To stop it, "the Fed has to signal a tectonic shift in its policy. Then I also wonder if there's an underlying fear that the Fed's reticence to hike is hiding something more serious in the global economic landscape, and the yen strengthens when there's a risk aversion."