The single currency fell to $1.4073 in Tokyo trade from $1.4109 in London late Monday. The European single unit also weakened to 108.14 yen from 108.57 yen.
The dollar was flat at 76.84 yen compared to 76.86 yen. The US markets were closed Monday for the Labor Day holiday.
European stocks plummeted Monday. Bonds issued by Greece and Italy fell, and the cost of insuring against default by Italy and France, as indicated by the market for credit default swap (CDS) instruments, rose sharply.
The head of the European Central Bank Jean-Claude Trichet warned Monday of an immediate and imperative need for enactment of a second debt rescue for Greece, and for tightened discipline in the management of eurozone economies.
"Investors are suspicious and jittery as fears (concerning the European sovereign debt crisis) spread," said Sumino Kamei, senior analyst at the Bank of Tokyo-Mitsubishi UFJ.
"An economic slowdown has been reconfirmed not only in the United States but also in Europe. Together with the long-term problem of sovereign debts, faded expectation for an ECB rate hike is weighing on the euro," Kamei said.
The European Central Bank is due to hold a policy meeting on Thursday.
While no change is expected "speculation is mounting that ECB President Trichet will be more dovish in the accompanying press conference," BNZ FX Strategist Mike Burrowes told Dow Jones Newswires.
"Attention will focus on the various events over coming days including a debate (Tuesday) in Italy's parliament on the country's fiscal austerity package," Credit Agricole said in a note to clients.
"Given that there is unlikely to be any decline in uncertainty over coming days the euro is set to remain under pressure," the bank added.
The banking sector was hit hard following US authorities' legal action against 17 leading international banks over their securitised mortgage trading at the heart of the 2008 financial crisis.
US President Barack Obama will on Thursday announce measures to boost the economy and employment, while US central bank chief Ben Bernanke will deliver a speech.
The dollar's downside against the yen has been supported by caution over possible yen-weakening market intervention by Japanese authorities after the unit hit a postwar high last month.
Ahead of a Group of Seven meeting of finance ministers and central bank chiefs starting Friday, Japanese finance minister Jun Azumi has voiced his resolve to convince his G7 counterparts that excessive yen rises are a concern.
Copyright AFP (Agence France-Presse), 2011