Yen adds to gains as investors run for cover

[NEW YORK] The Japanese yen surged again on Thursday as traders spooked by turbulence in financial markets continued to plow into the safe haven.

Federal Reserve Chair Janet Yellen's noncommittal stance on interest rate policy in a second day of hearings in Congress left currency investors nervous, while her warnings the global markets turmoil could threaten the US economy helped send equity markets from Tokyo to New York sharply lower.

The yen jumped 0.9 per cent against the dollar and 0.6 per cent on the euro, to follow up gains of about 1.5 per cent on Wednesday.

The dollar finished at 112.39 yen, and the euro at 127.25 yen.

Meanwhile the European currency gained on the dollar, rising 0.4 per cent to US$1.1323.

Ms Yellen leaned to dovishness in her testimony but maintained the Fed's line since its December rate hike that the trend is for more increases, albeit only very gradually.

However, noting that other major central banks have cut rates to negative territory - the Swedish central bank took its short-term rate to -0.5 per cent on Thursday - she hinted that the Fed was still mulling the longer-term impact of global markets turmoil and slower growth.

Some took that as a sign the Fed could consider reversing course.

"Now, with the Fed not only unsure about further interest rate hikes but also potentially entertaining the possibility of rate cuts and negative interest rates on the hazy horizon, the previously rising US dollar has made an abrupt U-turn," said James Chen at Forex.com.

AFP