Investing.com - The broadly weaker dollar fell to five-month lows against the yen on Tuesday as global stocks stabilized after two weeks of steep declines but investors remained cautious ahead of U.S. inflation data later in the week.
USD/JPY was down 0.9% to 107.68 by 03:26 AM ET (08:26 AM GMT), the weakest level since September 8.
Asian stock markets rose on Tuesday after U.S. stocks rebounded in the previous session after falling more than 5% last week. Concerns over faster inflation and thus more aggressive interest rate increases triggered two weeks of market turbulence.
But safe haven demand for the Japanese currency was underpinned as investors remained cautious ahead of U.S. inflation data due on Wednesday. A stronger-than-expected reading could spook markets again and trigger a fresh wave of selling.
Investors tend to seek out the yen in times of market turbulence as the currency is backed by Japan's current account surplus, which offers it more resilience than currencies of deficit-running countries.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was down 0.31% to 87.73. The index is still up around 0.9% for the month after hitting its lowest level in more than three years.
The euro pushed higher, with EUR/USD rising 0.27% to 1.2324, extending its recovery from last week’s low of 1.2204.
The single currency continued to be supported by expectations that the European Central Bank will start to scale back its stimulus program later this year on the back of a strong recovery in the euro zone economy.
Sterling also pushed higher, with GBP/USD rising 0.15% to 1.3859. Demand for the pound continued to be underpinned by growing expectations that the Bank of England will raise interest rates again in the coming months, despite economic uncertainty over Brexit.
The UK was to release what would be closely watched inflation data later in the day, which was expected to show that consumer prices eased slightly in January.