The euro eased to $1.4472 from 1.4477. The single European currency rose to 121.42 yen from 120.93. "It looks like the yen-buying spree based on risk aversion has waned and the pair is now testing the upside amid the absence of bad news here," Yuichiro Harada, dealer at Mizuho Corporate Bank, told Dow Jones Newswires.
The benchmark Nikkei stock average moved in positive territory before falling back slightly, despite heavy selling in US and European stock markets overnight. News that Japan raised its rating of its nuclear accident to a maximum seven on an international scale of atomic crisis, on a par with that of Chernobyl disaster, sent risk-averse investors to buy the yen and sell stocks on Tuesday.
Further worsening sentiment was media report citing TEPCO officials saying the radiation leak from the stricken Fukushima Daiichi plant could eventually be greater than Chernobyl in 1986. "The upgrading scared overseas investors" to prompt moves to unwind dollar buying positions in order to shun risks, said Teppei Ino, analyst at the Bank of Tokyo Mitsubishi UFJ. "The situation in the Fukushima plant will keep drawing the market's attention," Ino said.
He added that the dollar has been supported versus the yen by expectation that the Bank of Japan will continue its quantitative easing policy in the aftermath of the March 11 quake and tsunami. The euro eased on profit-taking versus the dollar after topping the $1.45 level Tuesday on Federal Reserve officials' remarks stressing the lack of inflationary pressure. On Monday, two top Federal Reserve officials, including vice chair Janet Yellen, played down the threat of inflation, saying commodity price rises are "transitory" and not enough to warrant a tightening changing the Fed's easy money stance.