LONDON: The yen gained broadly on Tuesday, jumping over 1 percent against the low-yielding euro, as a recent rally in risky assets and crude oil fizzled out, reviving demand for the safe-haven currency.
The euro fell to its lowest since April 2013 against the yen and dipped below $1.10 against the dollar for the first time in three weeks after a key index on German business climate fell sharply, raising worries about Europe's largest economy.
The safe-haven Swiss franc jumped to a one-month high against the euro, helped in part by comments from Swiss National Bank President Thomas Jordan, who said there was a limit to how low interest rates could go.
Earlier, sentiment for riskier assets was hurt by China's decision to set a softer mid-point for the yuan, although most traders expect it to remain steady before a meeting of G20 finance ministers and central bankers in Shanghai later this week.
The dollar was down 0.8 percent at 112 yen, surrendering Monday's gains made on a bounce in stocks and commodities, and hitting an 11-day trough of 111.855. The euro touched 123.13 yen, its lowest since April 2013.
"With oil lower and China setting a weaker fixing, risk sentiment has been hit. That is taking the yen higher," said Yujiro Goto, currency strategist at Nomura. "Also, people are not expecting any intervention by the Japanese before the G20 meeting."
A senior U.S. Treasury official told reporters on Monday that the meeting in Shanghai would reiterate the importance of commitment to avoiding forex rate misalignments.
In reiteration of existing G20 commitments, the Treasury official said members will also be asked again to refrain from manipulating exchange rates for competitive purposes.
In Europe, the focus was on the battered sterling. The pound was down 0.3 percent at $1.4105, having slid to $1.4057 -- a low not seen since March 2009 -- on Monday. It fell nearly 2 percent on Monday, posting its biggest one-day drop in almost six years.
Selling in the pound accelerated after London Mayor Boris Johnson announced his support for Britain to leave the EU. Britons will go to the polls on June 23 to decide whether to remain in the EU and sterling is expected to be volatile until then.
Bank of England policymakers, including governor Mark Carney, told lawmakers that the drop in sterling could boost inflation, a remark traders said showed the central bank was comfortable with the currency's current weakness.
Carney also said there were a number of options to stimulate Britain's economy if needed, including interest rate cuts and shortening its time horizon for returning inflation to target.
"Monetary policy will not be a big driver for sterling given all the uncertainty," said Geoff Yu, investment strategist at UBS Wealth Management. "What the uncertainty can do is push back rate hike expectations, and that will weigh on sterling."
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