While markets around the globe fall precipitously, partially due to Japan’s faltering economy, the yen is finding renewed strength; it hit 136.80 to the dollar early Tuesday afternoon in London.

The yen combined with the Tokyo Stock Exchange’s key gauge to allow Tokyo policymakers a sigh of relief. The the 225-issue Nikkei average ended the day at 14,369.63, up 261.74 points from Monday.

The TSE’s rebound was one main factor fueling the yen’s rise; the other was Monday’s plunge in New York stock prices, which put pressure on the dollar.

In Tokyo, the dollar stayed mostly in the 139 yen range in volatile trading as it looked for new direction after its steep fall overseas during the night.

The U.S. currency bought 138.22 yen in late afternoon trading, down 3.30 yen from late trading in Tokyo on Monday and also below its level of 140.78 yen in late New York trading on Monday. At one point in Tokyo, the dollar was quoted as low as 138.10 yen.

Dealers were taken by surprise by the yen’s newfound muscle in light of Japan’s prolonged economic slump. One exchange dealer said the yen was the strongest among major currencies in Tuesday trading.

As for the Nikkei, at one point during the day’s volatile trading, the barometer was down more than 400 points to 13,664.74, its lowest intraday level this year.

In the morning, there was no doubt among traders that the Nikkei would fall after New York’s Dow Jones industrial average slid 512.61 points, or 6.37 percent, Monday to post its second-biggest point loss.

Last week the Nikkei fell to its lowest level in 12 years, closing at 13,915.63 Friday as Russia’s financial and political crisis sent stock prices across the globe tumbling.

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