The yen hit an 18-month high on Friday as investors wagered the Bank of Japan might be done adding fresh stimulus to the economy, culminating in a sharp rise on the week that dragged stocks around the world lower.
With Japan on holiday, speculators drove the yen through 107.00 per dollar for the first time since October 2014. It was around 112.00 before the BOJ unexpectedly held policy steady earlier this week, Reuters reported.
Often seen as a sign of broader risk aversion among investors, the strong yen coupled with a decline on Wall Street overnight pushed Asian and European stocks into the red.
"Dollar/yen is not undervalued, and global macro conditions are by no means positive for risk sentiment," Bank of America Merrill Lynch analysts wrote in a note to clients, adding that a test of 100 yen in the coming months is likely.
Surprisingly strong first quarter eurozone growth - the fastest growth in five years finally bringing the region's economy above its pre-crisis peak - supported the euro, keeping it up 0.4% on the day at $1.14.
A high exchange rate hurts exporters, however, and European stocks felt the brunt.
The yen is up more than 4% against the dollar this week, putting it on track for its best week since the depths of the global crisis in October 2008 and one of its best weeks since the 1990s.
It had been at 111.67 yen per dollar before Thursday's surprise decision by the BOJ not to ease policy further.
The dollar remained on the back foot following Thursday's GDP data that showed the US economy virtually ground to a halt in the first quarter, expanding at only at 0.5% annualized pace. That was the slowest growth in two years.
The dollar index, a measure of the greenback's value against a basket of currencies, fell 0.4% on Friday and was on course for its third consecutive monthly decline, something not seen for five years.
