The yen weakened to the lowest level in almost three years on speculation the Japanese prime minister, Shinzo Abe, will nominate a central bank chief who favours stimulus.
It depreciated 0.7 per cent to ¥94.05 per US dollar at 9.32am in New York trading yesterday and earlier traded at its lowest level since May 2010.
The euro strengthened 0.8 per cent to US$1.3293 and the yield key on 10-year Spanish notes fell two basis points.
Mr Abe is likely to call on the Asian Development Bank president, Haruhiko Kuroda, who said this month there was "substantial room" for easing, and Kikuo Iwata as his deputy, according to two officials with knowledge of the discussions.
"The market seems to have formed an opinion that Kuroda is a dove and if he indeed becomes the new BOJ [Bank of Japan] governor, he would be willing to do much more to support growth," said Geoffrey Yu, a senior currency strategist at UBS in London.
"The yen is weakening on speculation that there will be more policy easing."
Speculation about Mr Kuroda's appointment also spurred Japanese equities. The Nikkei 225 Stock Average surged 2.4 per cent to its highest level since September 2008, helping the MSCI All-Country World Index to gain 0.3 per cent.
The yen weakened against all 16 of its major peers, losing 0.6 per cent versus the euro. Japan's currency has dropped 6.7 per cent this year, the biggest loser among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes.
The British pound has seen the second-biggest decline, falling 5.8 per cent. Sterling slipped 1.2 per cent yesterday to 88.03 pence per euro after depreciating to the weakest level since October 2011.
Moody's Investors Service lowered Britain's credit rating on Friday by one level to Aa1 from Aaa.
* Bloomberg News