- Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh
- Yen soars in early Asian trade
- Aussie dollar tumbles on risk-off sentiment
The yen surged on Thursday through key technical levels as heightened worries about the global economy pushed investors to safe haven-assets in moves exacerbated by thin holiday volumes.
Charging the risk averse mood was Apple Inc's AAPL.O move on Wednesday to cut its sales forecast for its latest quarter, on slowing iPhone sales in China. That followed a series of surveys that showed factory activity weakening across much of Europe and Asia in December.
Market participants fled to the safety of the highly liquid Japanese yen JPY= which rose 1 percent versus the dollar on Thursday. In early Asian trade, the dollar tumbled to an intra-day low of 104.96 yen, its lowest since March 2018.
The spike in risk aversion triggered massive stop-loss flows from investors who had held short positions on the yen for months. A lack of liquidity, with Japan still on holiday after the New Year, added to the sharp surge.
Market participants described the move as a "flash crash" in major currencies against the yen, driven primarily by technical, not fundamental, factors.
Longer-term, however, analysts see other reasons for the yen to rise.
"The yen is undervalued and can strengthen both if the dollar weakens across the board, but also if our broadly positive view that the global economy will stabilize at potential growth this year proves to be wrong, the Fed pauses and/or we get a risk-off market correction-as we saw at the end of 2018," said Athanasios Vamvakidis, FX strategist at Bank of America Merrill Lynch.
The Australian dollar AUD= , often considered a gauge of global risk appetite, fell to its lowest level since 2009 in early Asian trade to an intra-day low of $0.6776. The Aussie dollar last traded at $0.6931, down 0.74 percent. Weaker-than-expected data out of China, Australia's largest trade partner has taken the shine off the Aussie dollar in recent weeks.
Against the yen, the Aussie dollar AUDJPY= fell 1.8 percent to 74.67.
China's economy remains of major concern for markets after a measure of its manufacturing activity shrank for the first time in 19 months in December, hit by the Chinese-U.S. trade war, with the weakness spilling over to other Asian economies.
The dollar index .DXY was at 96.77, relatively unchanged from its previous close.
However, analysts expect the dollar to come under pressure in coming months with diminishing prospects for U.S. central bank rate hikes in 2019, which has driven Treasury yields lower.
The yield on U.S. 10-year treasuries US10YT=RR fell to 2.63 percent, the lowest in nearly a year on Wednesday.
Federal Reserve chairman Jerome Powell speaks in Atlanta on Jan. 4. Any acknowledgement that growth risks are building and financial conditions tightening is likely to be read by traders as a dovish policy signal.
Elsewhere, sterling GBP= fell 0.7 percent to $1.2516 on Thursday.
The euro EUR= was down marginally at $1.1340. On Wednesday, the single currency fell 1 percent after data showed manufacturing activity contracted in Spain, France, Italy, and Germany.
