The Japanese yen fell past 112 against the dollar to a 10-month low on Thursday, extending its previous day's slide to post its worst two-day performance in over two years against a broadly strengthening greenback.
A run of dire economic news out of Japan has stirred talk the country is already in recession and that Japanese funds were dumping local assets in favour of US shares and gold.
"The strongest explanation (for the yen's current decline) is a widespread selling by Japanese asset managers amid growing fears about the health of Japan's economy," said Raffi Boyadijan, investment analyst at XM.
Improving risk appetite in global markets has also hit the yen, which usually tends to benefit in times of market stress.
China reported a drop in new coronavirus infections on Thursday, but scientists warned the pathogen may spread more easily than previously believed as two elderly passengers from a ship quarantined in Tokyo became the latest to die.
China also cut its benchmark lending rate on Thursday, as widely expected, as the authorities move to lower financing costs for businesses.
By midday in London, the yen traded at 111.93 to the dollar, having earlier breached the 112 mark to hit the day's low of 112.18.
"There's a combination of factors (for the yen weakness) - a broader strengthening of the dollar on the back of the coronavirus which is making the dollar more attractive across the board," said Lee Hardman, currency strategist at MUFG in London.
"To a degree, it was a catch-up move."
Hardman also noted a pickup in purchases of foreign bonds and equities by Japanese investors during dips in the yen in recent weeks.
The euro was 0.1% lower at $1.079
The dollar also rose 0.3% on the Chinese yuan to 7.0215 and the Australian dollar sank to 11-year lows at $0.6630 on a weaker-than-expected employment report.
Against a basket of peers, the greenback hit its highest since April 2017 and is now up over 3.5% this year.
"The critical thing to understand is the Yen weakness is not so much "Risk on" as it is Japanese asset managers heading for the Tokyo market exit in droves," said Stephen Innes, Asia Pacific Market Strategist at AxiCorp.
"With the USD inflow unyielding, it's unclear what could stem this tide other than US administration talking down the dollar." US President Donald Trump has long protested that the dollar was too strong and unfairly penalising US business.
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