Stocks and the local currency extended losses as an natural disaster that appears to have been man-made near a known nuclear-testing site in North Korea was detected by several monitoring agencies on Wednesday. China has guided the yuan steadily lower since sharply devaluing the currency last summer, rattling traders who fear it could eventually set off a round of competitive devaluations.
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“We were starting to see signs that the economic slowdown in China had run its course, so today’s report was a disappointment”, Masayuki Otani, chief market strategist at Securities Japan Inc, told Bloomberg News.
Against the dollar, the yen rose towards an 11-week high of 118.705 hit on Monday, up 0.4 percent on the day at 118.83 yen.
Data showing euro zone core inflation slowed for the second consecutive month in December added to the single currency’s woes, and reinforced expectations the European Central Bank will have to add further monetary stimulus to prop up consumer prices and boost growth.
Looking at other asset classes, volatility has spread, with the German Dax Index shedding more than 3 percent an hour into the trading day, while the Japanese Nikkei index closed the first trading session of 2016 finishing by a touch lower than that.
Still, Chinese equities saw modest gains as authorities continued unveiling stock-supportive measures after a 7 percent plunge on Monday rattled global markets.
The US dollar touched a near three-month low of 118.35 yen and the euro slid to a nine-month trough of 127.465 yen.
In currencies, the yen attracted bids amid the risk aversion that gripped financial markets globally from the start of 2016.
Shanghai shares managed to limp up 0.2 percent on Tuesday after Chinese regulators said they may restrict stock sales by major shareholders.
Against the yen, the euro fell 0.7 percent to an eight-month low of 128.55 yen.
Meanwhile, the U.S. dollar and yen have drawn support from anxiety over global growth and geopolitical risk stemming from Iran-Saudi tensions.
The South Korean won weakened 1.10 percent against the dollar, while the Malaysian ringgit declined 0.94 percent.
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Relations between the two major oil producers collapsed in acrimony this week after Saudi Arabia’s executed a Shi’ite cleric, setting off a storm of protests in Tehran.
