The yen rose on Tuesday as traders sought safety in the low-risk currency on anxiety about sluggish global growth, further losses in the Chinese stock market and the breakdown in relations between Iran and Saudi Arabia. The Japanese currency, traditionally sought at times of risk aversion, climbed to its strongest level since April against the euro and hovered at its highest since October versus the dollar. It also rose to loftiest against the sterling since October 2014.
"It's a risk aversion trade. It's a persistent play in the yen," said Mazen Issa, senior currency strategist at TD Securities in New York. The yen briefly retreated from Monday's highs after China injected an estimated $20 billion into money markets in a stability effort after Monday's alarming 7 percent drop in stocks. Against the dollar, the yen rose toward an 11-week high of 118.705 hit on Monday, up 0.3 percent on the day at 119.14 yen , according to EBS data.
The euro hit a one-month low of $1.0710, down 1 percent from Monday after data showed euro zone core inflation slowed for the second consecutive month in December, reinforcing expectations the European Central Bank will have to add further monetary stimulus to avert deflation. The dollar hit a one-month high against a basket of major peers, last up 0.7 percent at 99.532.