The yen seems likely to remain under pressure as investors, looking past the Bank of Japan's decision to hold policy steady on Thursday at its April meeting, expect new officials to take aggressive action to beat deflation.
If the BOJ expands its stimulus program next month, that could open the way for a test of 100 yen, said Ronald Ip, director of wealth solutions group for HSBC Global Markets in London.
BNY Mellon capital flows data showed that the U.S. dollar has been steadily net bought for four consecutive sessions, with U.S. stocks also largely in demand.
Most of the U.S. stock purchases came from foreign investors, which is another source of support for the dollar, the bank said.
"The summation of our investor activity in recent weeks suggests market participants have been increasingly favoring the dollar, which is no longer out of favor during risk-on investor sentiment, while still retaining its safe-haven allure during bouts of risk aversion," said Samarjit Shankar, director of market strategy at BNY Mellon in Boston.
The euro rose 0.4 percent against the yen to 124.80 yen, with the session peak at 125.95 yen, the highest since Feb. 13. Investors' expectations of future rate cuts in the euro zone, however, remained a focal point, reinforced by comments from International Monetary Fund head Christine Lagarde, who said the ECB should lower rates.
Jane Foley, senior currency strategist at Rabobank in London, acknowledged the downside risks currently lurking in the euro zone. "The results of the Italian elections has so far failed to cause significant disruption in peripheral bond markets, but the impact has the potential to breed uncertainties for weeks and even months," Foley said.
In addition, Morgan Stanley analysts said in a note to clients that the downward revision of euro-zone growth forecasts and the below-target inflation forecast continued to provide the ECB with flexibility for future cuts in interest rates.
They said any rebound in the euro against the dollar was an opportunity to sell for an eventual decline toward $1.27/1.28.