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New York - Japan's currency was pummelled on Thursday after credit ratings agency Standard & Poor's downgraded Tokyo's public debt for the first time since 2002.
The dollar rose to ¥82.86 compared with ¥82.16 a day earlier.
The dollar had firmed to ¥83.22 in earlier trading, while the euro had reached ¥114.01, its highest level since November 22.
Meanwhile the euro traded up against the dollar at $1.3730 around 22:00 GMT, up from $1.370 late on Wednesday in New York.
The European currency earlier climbed to a two-month of high of $1.3750.
"Currency markets were roiled today by S&P's unexpected downgrade of Japan," said Boris Schlossberg at Global Forex Trading.
S&P cut Japan's sovereign debt rating to "AA minus" from "AA", accusing the government of lacking a "coherent strategy" in efforts to ease a mountain of debt.
"The downgrade reflects our appraisal that Japan's government debt ratios - already among the highest for rated sovereigns - will continue to rise further than we envisaged before the global economic recession hit the country and will peak only in the mid-2020s," S&P said.
"In our opinion, the Democratic Party of Japan-led government lacks a coherent strategy to address these negative aspects of the country's debt dynamics," it said.
Japanese Finance Minister Yoshihiko Noda insisted his government would strive for fiscal discipline to win the confidence of markets.
"Today's S&P downgrade may be the start of a broader market shift in attitude towards the yen," Schlossberg said.
"The yen remains vulnerable to further selloffs as it may now begin to trade off credit risk concerns."
Kathleen Brooks at trading group Forex.com suggested the S&P downgrade was unlikely to have much further impact given that Japan's massive debt burden is mostly owed to its own citizens.
"Although (the) move is a warning signal that debts of Western nations remain a bigger issue than just peripheral Europe, Japan's debt is held mostly by domestic investors," Brooks said.
"Thus, the yen sell-off may also prove to be short-lived."
In late New York trade, the pound edged up to $1.5934 from $1.5929 late on Wednesday.
Against the Swiss franc, the dollar rose to 0.9449 francs from 0.9416 francs the previous day.
