Yen rises in Asia

The yen hit a two-week high versus the dollar on Tuesday as investors shunned riskier assets, while the rouble - a major victim of plunging oil prices - rebounded after the Russian central bank hiked rates to halt its currency's collapse. The slide in oil prices has triggered a bout of volatility in global markets in recent weeks, leaving nervous investors fretting over the deteriorating health of the global economy.
Adding to the anxiety is the US Federal Reserve's two-day policy meeting starting later in the day, which could open the door for an interest rate hike in the middle of next year. The yen rose 0.4 percent to 117.30 to the dollar, its highest level since November 27. The yen tends to strengthen at times of economic stress as it is often used as a funding currency for investments in higher yielding assets.
Capital flight out of energy-related and higher yielding assets showed little sign of abating, with US crude futures hitting fresh 5 1/2-year low. The Russian rouble tumbled 11 percent on Monday, falling as low as 67.1375 to the dollar on EBS, or about half its value less than six months ago, prompting the Russian central bank to hike its key interest rate to 17 percent, from 10.5 percent, in an emergency meeting.
"This is definitely a step in the right direction. The real interest rate right now is significantly positive, 7 to 8 percent," said Jorge Mariscal, chief investment officer for emerging markets at UBS Wealth Management in New York. The rouble rebounded to 60.00 to the dollar after the surprise move late on Monday, though plunging oil prices and the West's sanctions linked to the Ukraine crisis cloud the currency's outlook.
Traders say the fate of the rouble - and of many other commodity currencies - rests on the price of oil. US crude futures fell 3.3 percent on Monday after Opec once again said it will not cut oil output despite a global supply glut, and a UAE official opposed holding an emergency meeting of the producer group to support prices.
Plunging oil prices are hurting other commodity currencies, with the Canadian dollar sliding to five-year lows of C$1.1655 to the US dollar. The Australian dollar hit 4 1/2-year low of $0.8200 after a private survey showed activity in China's factory sector contracted in December for the first time in seven months.
But in a possible sign that sellers' position were stretched, the Aussie managed to bounce back to $0.8227, a gain of 0.2 percent from late US levels. Most investors were also cautious as the Fed looks set to debate whether to change its policy statement to indicate it's moving a step closer to rate hikes next year. While plunging oil prices raised expectations that the Fed could avoid any changes that could rattle already nervous markets, some think the Fed is on track to slowly move towards its first rate hike in almost a decade.
"I think the Fed will drop the phrase that rates will be low for a considerable time. Given recent volatilities, I think we need to be on alert for its impact on emerging markets and commodities," said a trader at a Japanese bank. The euro was little changed at $1.2445.