The dollar fell below ¥120 in Tokyo trading on Wednesday, with the yen attracting buying interest as a safe-haven currency amid a resurgence of risk aversion among investors due to falling oil and stock prices.
At 5 p.m., the dollar stood at ¥119.97-97, down from ¥120.62-63 at the same time Tuesday. The euro was at $1.0906-0907, slightly up from $1.0902-0903, and at ¥130.83-86, down from ¥131.52-53.
The greenback extended losses in Tokyo after breaching the ¥120 line in New York trading overnight, as U.S. stocks tumbled on falling oil prices, fueling risk-off sentiment, traders said.
The U.S. currency briefly slid below ¥119.50 as the benchmark 225-issue Nikkei stock average sank to levels slightly above the 17,000 threshold.
In late trading, the dollar pared losses to approach ¥120, supported by buybacks, traders said.
Persistent concerns over global crude oil markets, as well as the flagging Chinese economy, remained a heavy drag on the dollar against the yen, although its downside was supported by the Bank of Japan’s introduction of a negative interest rate policy, traders said.
The dollar-yen rate was “also capped by receding expectations of an additional interest rate hike by the U.S. Federal Reserve in March,” when it next holds a policy-setting meeting, said an official at a currency margin trading service provider.
The dollar has been top-heavy this week after soaring as high as around ¥121.70 on Friday, following the BOJ decision to cut interest rates below zero.
“The initial impact of the negative rate policy seems to have faded away,” an official at a major Japanese bank said.
For the dollar to regain upward momentum, “oil and stock prices need to be stabilized,” another bank official said.