The dollar tumbled below ¥119 in Tokyo trading on Wednesday after a four-day year-end holiday, as weak Chinese economic data stirred up risk aversion among investors.
At 5 p.m., the dollar stood at ¥118.97-98, down from ¥120.40-41 at the same time on Wednesday. The euro was at $1.0912-0913, down from $1.0934-0934, and at ¥129.82-83, down from ¥131.66-67.
After hovering around ¥120.30 in the early morning, the greenback climbed toward ¥120.50 until midmorning, despite the Nikkei average’s sluggish performance.
However, a disappointing December reading of the Caixin China manufacturing purchasing managers’ index sent Tokyo stocks into a tailspin, which drove down the dollar below the ¥120 threshold, traders said.
The dollar accelerated its fall in late afternoon trading to slip through the ¥119 line for the first time in two and a half months, after the Nikkei finished the first session of 2016 down more than 3 percent.
The dollar’s topside versus the yen was also pressured by the deteriorating Middle East situation, traders said, with Saudi Arabia severing its diplomatic ties with Iran after mobs stormed the Saudi Embassy in Tehran in protest against Saudi Arabia’s execution of a prominent Shiite cleric.
Although the dollar’s downside was initially expected to be supported by buying on dips, “players could not help taking the risk-averse stance in the face of such a stock sell-off,” a foreign exchange broker said.
Investors may rush to close dollar-long positions on any further fall of the U.S. currency, an official at a currency margin trading service provider said.