"Although the impact of Obama's proposed banking regulation changes is clear enough on equities, currency markets seem to see the implications as ambiguous," said Adam Cole, global head of fx strategy at RBC Capital Markets. The dollar hit a five-week low of 89.78 yen, according to electronic trading platform EBS. By 1216 GMT, it was at 90.10 yen, down 0.3 percent on the day.
The yen continued to benefit as investors unwound risk. The euro hit a 9-month low against the yen of 126.55 yen. But further falls were limited as the pair held key chart support of 127 yen, traders said. Obama's proposals, which require congressional approval, would prevent banks or financial institutions that own banks from investing in, owning or sponsoring a hedge fund or private equity fund.
The rules would also bar institutions from proprietary trading operations, unrelated to serving customers, for their own profit. The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.1 percent at 78.249. Concerns about the fiscal situation in Greece and other smaller eurozone countries pushed the euro to a 6-month low against the dollar this week.
The euro was up 0.2 percent at $1.4130 but still on track for a 1.5 percent decline for the week. "Taken together the three issues add considerably to uncertainty about prospects for the global recovery, with the possibility of a serious restriction of Chinese credit the most important factor," Barclays analysts said in a note.
The Australian dollar was on track to fall 1.8 percent on the week. Analysts said the Aussie would also be hampered on a play by the Australian government to lift taxes on mining companies, which have been making bumper profits from surging metals and coal prices.