The euro slumped to a lifetime low against the Swiss franc and a 1-1/2-year trough versus sterling on Tuesday, stung by liquidity concerns before a key euro zone refinancing program expires this week.
The yen rallied on speculation of domestic repatriation flows before the second quarter ends this week and falls in global stocks cranked up the safe-haven appeal of the Japanese currency, as well as the Swiss franc and the dollar.
Pressuring the euro were concerns that banks on Thursday must repay 442 billion euros borrowed a year ago at rock-bottom rates as part of the European Central Bank's efforts to boost liquidity.
The ECB holds a three-month tender on Wednesday which many in the market expect will be tapped as banks scramble to pay back the one-year funds. Expectations are that 210 billion euros will be allotted at the offer.
Analysts said such funding needs are a reflection of ongoing stress in the banking sectors of some euro zone countries, including Portugal, Ireland, Italy, Greece and Spain, which were pushing the euro lower.
Markets are tense going into the end of the long-term refinancing program, along with tomorrow's three-month auction, said John Hydeskov, senior currency analyst at Danske in Copenhagen.
Investors are worried that PIIGS banks may take significant liquidity from the system.
ECB Governing Council member Christian Noyer said the central bank would do everything necessary to make sure the expiry of the one-year funding program passed smoothly.
The euro fell to 1.3250 francs according to trading platform EBS, the lowest since the single currency was launched in 1999. By 0751 GMT, it had pulled back to around 1.3290 francs.
The euro has lost roughly 4 percent against the Swiss franc since mid-June when the Swiss central bank backed off a pledge to fight excessive franc appreciation. It has shed about 10 percent this year.
Against sterling, the single currency fell to 81.10 pence, its weakest since November 2008, while the euro fell 1.3 percent on the day to 108.20 yen. It fell nearly half a percent to $1.2225.
The yen benefited from broad risk aversion as European shares .FTEU3 fell 1.6 percent, tracking a fall in Asian stock markets.
This prompted investors to dump higher-risk currencies including the Australian and New Zealand dollar, pushing each of them down roughly 2 percent versus the low-yielding yen.
The Japanese currency also rallied against the dollar, which fell 0.8 percent to 88.60 yen.
Some in the market said not all yen strength was being driven by safe-haven flows, with some pointing out that a drop in U.S. Treasury yields, which makes U.S. debt less attractive to Japanese investors, had also been weighing on dollar/yen.
The benchmark 10-year U.S. Treasury yield fell below the key 3 percent level to strike a 14-month low.
Financial markets will also closely watch debt auctions by France and Spain later this week after tepid demand for Italy's sale of 7 billion euros of government bonds on Monday kept worries about euro zone debt troubles alive.
(Additional reporting by Tokyo Forex Team, editing by Mike Peacock)