In late-afternoon trading in New York, the dollar was at 109.13 yen, down from 109.28 yen late Wednesday. The Euro was trading at $1.0690, up from 1.0578. Sterling was at $1.6075, up from 1.6043. Coming on the back of reports of a decline in German unemployment Wednesday and an improved budget outlook in Italy, fund managers were said to be flipping money out of US assets and into European markets.

For some time, the yen had been the pick of the currency litter. Since July, it has appreciated more than 11%, whilethe euro has moved about 5 per cent higher. "Buying yen for dollars is much more of a coin toss than buying euro," said Caleb David, options trader at Bank Julius Baer in New York.

"Fine, you can get out of your dollar holdings, but what if the Bank of Japan comes along and rips your head off? You don't come across that problem with the euro," he said. July 13 was the day it all began to change for the euro. Defying market expectations, it turned off the road to parity, bottoming at $1.0108 after its buoyant beginning at $1.16675 January 1.

As Germany was putting up surprisingly strong business-confidence numbers, the US was showing a propensity to spend much more than it sold or saved. When that resulted in a huge trade gap, markets began wondering just how the US planned to lure all those dollars floating around in foreign markets back to its shores. That was going to be tough amid rising fears of Fed ate moves.Regarding Japan, eroding profits, concerns about economic-growth data and the looming threatof yen-strengthening intervention by Japan's central bank has led traders to look westward.

Even though Japan may hold the potential for higher relative returns than the euro zone, investors expect there is a lot more room for the euro to advance against the dollar than the yen, said Robert Lynch, currency strategist at Paribas in New York. "The huge slide in dollar/yen was not matched by a slide of a similar magnitude in the dollar against the euro," he said.

Elsewhere, the South Korean won slid sharply as Korea's Kospi stock index fell below 900 points for the first time since July, amid fresh fears about the health of the country's chaebols, or conglomerates. Equity investors were roiled by news that Hyundai Group officials have been barred from leaving the country until an investigation into potential stock manipulation is completed.

This came as the deeply indebted Daewoo Group acknowledged telling foreign creditors the group's foreign affiliates would only make interest payments when funds becomeavailable. The dollar closed in Seoul at 1,190 won, up from 1,184.50 won. The Thai baht, meanwhile, survived a test of an 11-month low against the dollar to end a bit lower. The Indonesian rupiah weakened to 7,845 rupiah from 7,700 rupiah against the dollar amid concerns that political risks associated with the violence in East Timor and linked to coming presidential elections will weigh on the currency.