LONDON: The dollar jumped and traders bought into the safe-haven yen on Thursday after Britain's Brexit deal with the European Union was plunged into uncertainty, spooking investors.

The resignation of British Brexit minister Dominic Raab sent sterling plummeting more than one percent , reversing the euro's gains and boosting the greenback.

The dollar index rose 0.3 percent to 97.123, while the yen gained 0.2 percent to 113.355 against the dollar. Both currencies are sought out as safe places to park your cash in times of market flux.

"The dollar is benefiting from the sterling crash," said Manuel Oliveri, FX strategist at Credit Agricole.

British Prime Minister Theresa May had said she won the backing of her senior ministers for an EU divorce deal on Wednesday but many in her government remain unconvinced.

Raab's resignation leaves May battling for survival as well as trying to convince her Conservative Party to support the EU withdrawal agreement.

The euro, after earlier trading up 0.3 percent, was flat at $1.1316. Britain is one of the euro zone's biggest trading partners.

Sterling shed 1.3 percent versus the dollar to $1.2817  and also 1.3 percent versus the euro to 88.25 pence .

Analysts said the dollar's gains on the back of the sterling slump were contained after some cautious comments about the economic outlook from Federal Reserve chairman Jerome Powell overnight.

U.S. inflation data on Wednesday, which indicated price growth is moderating, also subdued the dollar's rally.

Reports out of Italy that Prime Minister Giuseppe Conte was looking to work with the EU over his government's 2019 budget, which has been rejected by Brussels, to avert massive fines had earlier helped support Italian government bond markets and the euro.

The Australian dollar jumped more than 0.8 percent to $0.7294 after the upbeat jobs data. The New Zealand dollar also rose.