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CURRENCIES

Yen gains as stocks fall in broad-based selloff

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A pedestrian walks past a stock indicator board showing the share price of the Tokyo Stock Exchange in Tokyo on Dec 26, 2018.

London

THE Japanese yen gained half a per cent against the dollar on Thursday as widening cracks in global stock markets prompted investors to load up on perceived safe-haven assets.

Though US stocks jumped on Wednesday, sentiment was decidedly more cautious going into the US trading session on Thursday with European equities falling one per cent while US stock futures slipped more than 1.5 per cent.

With concerns about a fresh chapter of trade tensions between the United States and China unfolding, investors piled into low-yielding currencies such as the Japanese yen and the Swiss franc in thin year-end trading.

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"On the back of the global growth concerns and the sharp turnaround in markets we have started to see the yen regain its place as the safe-haven of choice," said Lee Hardman, a currency strategist at MUFG in London.

The yen strengthened across the board, rising more than half a per cent against the dollar to 110.80 yen. Against the Swiss franc, the dollar fell 0.44 per cent at 99.14 cents.

In a buying frenzy as spectacular as the recent rout, US stocks soared with the Dow Jones Industrial Average rocketing more than 1,000 points for the first time on Wednesday, sending global stocks higher.

But Thursday's session was dominated by concerns about falling Chinese industrial profits, which sent bond yields in Germany lower and commodity-linked currencies such as the Australian dollar and the New Zealand dollar down a quarter of a per cent each.

Reuters reported on Thursday that the Trump administration was considering an executive order in the new year to declare a national emergency that would bar US companies from using Huawei and ZTE products.

"The oil price bounce pushed commodity currencies higher across the board but the latest Huawei news is a bit of a dampener on sentiment in these thin markets," said Alvin Tan, a currency strategist at Societe Generale in London.

The Australian dollar, often considered a gauge of global risk appetite and highly correlated to global commodities, was down 0.26 per cent at 70.51 cents. The Norwegian kroner and the New Zealand dollar were also down a quarter of a per cent each.

Broadly, the dollar failed to capitalise on an eight-day high touched in the previous session on the back of firmer US Treasury yields. The greenback was weaker against a basket of its rivals in early London trading.

The dollar index, a gauge of its value versus six major peers, slipped 0.2 per cent to 96.82, after gaining 0.5 per cent on Wednesday.

Volatile markets and concerns about a slowdown in the world's biggest economy have weighed on longer-dated US bond yields and narrowed the interest rate differentials between the US and other global bond markets. REUTERS