Investing.com - The dollar was lower against the yen on Tuesday as falling oil prices fuelled widespread risk aversion, bolstering investor demand for the safety of the yen.
USD/JPY was down 0.66% to 119.91, off the seven year peaks of 121.81 struck on Monday.
Oil prices fell to five year lows Tuesday amid expectations that a growing supply glut would continue to weigh on prices into the new year.
The yen also gained ground against the euro, with EUR/JPY down 0.35% to 148.13.
The dollar continued to remain supported by the diverging monetary policy stance between the Federal Reserve and central banks in Japan and Europe.
Last week’s strong U.S. jobs report for November prompted investors to bring forward expectations for the first hike in interest rates to mid-2015 from September 2015 ahead of the report.
Earlier Tuesday, the Wall Street Journal reported that Fed officials are looking at dropping an assurance that interest rates will stay low for a "considerable time", in its statement, following its upcoming policy meeting next week.
EUR/USD was up 0.32% to 1.2353, holding above from Monday’s two year trough of 1.2246. The dollar was also weaker against the Swiss franc, with USD/CHF down to 0.9730.
GBP/USD was almost unchanged at 1.5644 after data showing U.K. industrial output unexpectedly fell in October, pulled down by a steep drop in manufacturing.
Industrial production fell 0.1% in October as manufacturing output fell 0.7%, the largest monthly decline since May.
The commodity exposed currencies weakened broadly, with AUD/USD close to four year lows at 0.8283, while NZD/USD hit a two-year trough of 0.7609, before pulling back to 0.7699.
USD/CAD hit five year highs of 1.1501 and was last at 1.1476.
The U.S. dollar index, which measures the greenback against a basket of six major currencies, was down 0.32% to 88.90. On Monday the index rose to a five year high of 89.53.