Analysts and market participants said the trigger for investors to unwind their bearish yen positions overnight was comments from Koichi Hamada, an economic adviser to Japan's Prime Minister Shinzo Abe. Hamada told a TV programme on Monday that the yen's current level of around 120 per dollar is very weak.
Japanese Economics Minister Akira Amari said on Tuesday he will not comment on foreign exchange levels.
"Comments like this get attention when there's nothing else to trade on - particularly yesterday, when there were no big economic releases," said Bart Wakabayashi, head of forex at State Street in Tokyo. "But I don't see any reason for the euro to be supported."
The euro was down about 0.4 percent at 126.48 yen (0.20 pounds)
The dollar was down 0.2 percent on the day at 119.89 yen
The yen's rebound also came after the Bank of Japan on Monday signalled that the benefits of its stimulus programme were broadening, dampening speculation of more easing in the near term.
The euro has fallen for six straight sessions, and was last down about 0.2 percent on the day at $1.0549
Also weighing on the common currency was a Financial Times report that Athens was preparing for a debt default if it did not reach a deal with its creditors by the end of the month. Greece denied the report, saying negotiations were proceeding "swiftly".
Weakness in the euro helped lift the dollar index <.DXY> to a one-month high of 99.990 overnight. It last stood at 99.599, up about 0.1 percent on the day.
Sterling slipped about 0.1 percent to $1.4656
In Asia, the Singapore dollar rallied after the country's central bank surprised markets by keeping monetary policy settings unchanged. It rose as high as 1.3597 and was last trading at 1.3634
The Australian and New Zealand dollars modestly trimmed losses after Singapore's decision, triggering a broad pullback in long U.S. dollar positions.
Both currencies had skidded on Monday after Chinese trade figures rekindled worries about slowing growth in their biggest export market.
The Aussie edged up about 0.1 percent to $0.7594
The kiwi rose 0.2 percent on the day $0.7461
The next major test for the Antipodean currencies will come on Wednesday, when China releases industrial output, retail sales and first-quarter gross domestic product data.
Ahead of that, the market will take its cue from U.S. retail sales data due later on Tuesday.
(Editing by Shri Navaratnam and Richard Borsuk)
By Lisa Twaronite and Ian Chua