Japan’s yen hit its highest levels against the dollar since January on Monday, as markets extended moves triggered last week after weak U.S. labour data stoked recession worries and expectations of deeper rate cuts by the Federal Reserve.
Friday’s jobs data, coming on top of a string of weak earnings reports from large technology firms and heightened concerns over the Chinese economy, drove a global sell-off in stock markets, oil and high-yielding currencies as investors sought the safety of cash.

The selling continued on Monday, with U.S. Treasury yields falling further, stock indexes in the red, bitcoin dumped and the dollar losing ground mainly to the yen.
High-yielding currencies such as the Indian rupee and Mexican peso tumbled, while currencies that had hitherto been used for funding investments, such as the yen and China’s yuan, opens new tab, rallied strongly.
The carry-funding favourite currency, the yen, traded at 143 , up 2.3% versus the dollar and at levels last seen on January 2. It rose as far as 142.20.

The Swiss franc , another popular funding currency, was up more than 1% at 0.8488 to the dollar.
The euro was up 0.2% $1.0937 , the dollar index was down 0.4% at 102.72, while the Australian dollar fetched $0.6488 and was down 0.36%.
“The market pricing has a 50 basis point rate cut by the Fed at its September meeting, which I think will be too much,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo.

“The U.S. economy is showing signs of slowdown, but it’s not as bad as the market is pricing in.”
However, near-term momentum could keep the sell-off going, with technical levels also pointing to more yen gains, he said.
Treasury yields have been falling quite sharply since last week, when the Federal Reserve kept the policy rate in its current 5.25% to 5.50% range while Chair Jerome Powell opened the possibility of a rate cut in September.

SOURCE: REUTERS