In Tokyo, the greenback dropped below 115 yen as Japan’s Nikkei 225 stock index dived almost 5% following a rout in US and European bourses fuelled by worries about the global economy.
World markets have suffered a tumultuous start to 2016, hit by a slowdown in the world economy, particularly key growth driver China, and plunging oil prices.
The woes have led traders to rush into safe assets such as the yen and gold to protect themselves from the uncertainty and turmoil. The yield on Japanese government bonds - considered a rock-solid investment - also sank to zero for the first time in history on Tuesday.
The dollar dropped to 114.72 yen at one point on Tuesday, from 115.86 yen on Monday in New York, while the euro weakened to 128.74 yen from 129.67 yen.
The euro rose to US$1.1220 from US$1.1193, as deepening economic woes cast doubt on the chances that the Federal Reserve will raise interest rates again next month.
A rate hike tends to boost the currency as it spurs demand for dollar-denominated assets.
“The yen by default looks to be the safest” currency, Takao Hattori, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities, told Bloomberg News. “Soft US data is raising speculation that the pace of rate increases will be slow.”
Fed chief Janet Yellen is scheduled to appear on Wednesday and Thursday in Congress to discuss the economy and monetary policy.
Markets are waiting to see what she gives any forward guidance on the bank’s plans for monetary policy following its first rate hike in December after more than nine years.
Emerging market currencies retreated against the greenback. The South Korean won was down 0.39%, the Taiwan dollar was off 0.3% and the Indian rupee lost nearly 0.5%.
And crude’s drop below US$30 a barrel took a bite out of the oil-linked ringgit, which slipped 0.64%, while the Indonesian rupiah shed 0.69%. - AFP
Did you find this article insightful?