Dollar approaches 4- month low against yen

The dollar struggled near a four- month low against the yen on Wednesday as a bout of investor risk aversion hit US stocks and pulled US Treasury yields sharply lower, eroding the greenback’s interest rate allure.

The US currency was off 0.1 percent at 111.670 yen after plumbing 111.430, its lowest since November 28, 2016.

The dollar also nursed large losses against the euro. On Wednesday, the common European currency was a touch weaker at $ 1.0794 after surging 0.6 percent overnight to $ 1.0819, its highest since February 2.

“A key factor behind the latest currency developments was the big drop in US equities. The question now is whether equities will keep falling,” said Shin Kadota, senior strategist at Barclays in Tokyo.

“Unlike the dollar and treasuries, the ‘ Trump trade’ still had an impact on equities. But if such impact on equities is to fade, it would weigh on dollar/ yen. The dollar will also suffer against other currencies as US yields would decline,” Kadota said.

Stocks in Asia followed suit on Wednesday, with Japan’s Nikkei dropping 2 percent.

The dollar index against a basket of major currencies was little changed at 99.849 after retreating to a 1.5- month low of 99.642 overnight.

“The dollar has already fallen significantly, and technical factors and a further tumble in shares would be needed for it to decline further,” said Shusuke Yamada, forex strategist at Bank of America Merrill Lynch in Tokyo.