TOKYO: The yen on Tuesday jumped to its highest level against the dollar since late 2014 as a bloodbath on equity markets stoked investor demand for safe assets.
In Tokyo, the greenback dropped below 115 yen as Japan's Nikkei 225 stock index dived almost five percent 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 Tuesday.
The dollar dropped to 114.72 yen at one point Tuesday, from 115.86 yen Monday in New York, while the euro weakened to 128.74 yen from 129.67 yen.
The euro rose to $1.1220 from $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 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 percent, the Taiwan dollar was off 0.3 percent and the Indian rupee lost nearly half a percent.
And crude's drop below $30 a barrel took a bite out of the oil-linked Malaysian ringgit, which slipped 0.64 percent, while the Indonesian rupiah shed 0.69 percent.
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