The yen held large gains against a number of peers on Tuesday as investors sought refuge in the safe-haven Japanese currency amid a latest rise in European political concerns. The dollar traded at 111.930 yen after slipping to 111.590, its lowest since November 28. The euro fetched 119.910 yen following a dip earlier to a two-month low of 119.750.
The Australian and New Zealand dollars and the pound also gave ground to the buoyant yen.
The Japanese currency had rallied versus the dollar the previous day on an increase in risk aversion, dragged down as US Treasury yields fell in tandem with Wall Street shares and crude oil prices.
It also attracted demand thanks to the latest rise in investor caution towards European political developments generated after France's far-right National Front leader Marine Le Pen on Monday launched her presidential bid, vowing to fight globalisation and take France out of the euro zone.
French government bond yields rose sharply and European stocks fell amid perceived risks to the already strained European political establishment. "The drop in euro zone equities and the rise in European and US bond yields are pushing up the yen," said Yukio Ishizuki, senior currency strategist at Daiwa Securities.
The euro extended overnight losses and was down 0.3 percent at $1.0725, in reach of a one-week low of $1.0713 set the previous day. The latest decline pulled the euro further away from an eight-week high of $1.0829 scaled on Thursday against a broadly weaker dollar. Apart from France, investors also have to factor in elections in other parts of the European Union this year. Dutch and German elections will be held in March and September. Another presidential election looms in Italy, even as former Italian prime minister Matteo Renzi said he was willing to shelve his push for early voting. The euro's struggles did not give the dollar much traction against the yen.
The US currency has fallen 4.5 percent against the yen so far this year, hurt in large part by US President Donald Trump's protectionist trade rhetoric and his readiness to see the United States end a two-decade old "strong dollar" policy. The greenback had taken a knock after Trump and his top trade adviser Peter Navarro last week criticised Germany, Japan and China, saying the trading partners were engaged in devaluing their currencies to US disadvantage. The Australian dollar pared earlier modest losses and inched up 0.1 percent to $0.7668 after the Reserve Bank of Australia left interest rates unchanged and gave a somewhat upbeat assessment of the economy.