LONDON: A grim mood on global financial markets sent investors searching for the traditional security of the dollar and yen on Thursday, driving both higher against a euro weakened by the prospect of prolonged low inflation and negative interest rates.
A 1.5 percent surge for the New Zealand dollar after interest rates there were kept on hold had been by far the biggest move on major currency markets in Asian trading and early in Europe's day.
But the yen's jump to its strongest in three years against the euro and to five-week highs against the dollar dominated morning trade in London.
Worries over euro zone banks, and a sluggish global economy more generally, have been fuelled by signs that money managers are considering hoarding cash in bank vaults, given the lack of return on capital.
"There is the whiff of risk-off sentiment in the market and that is definitely helping the yen," said Alvin Tan, a strategist with French bank Societe Generale in London.
"The dollar has generally been a safe haven, particularly against emerging market currencies. But it remains underperforming against the more traditional safe havens like the yen."
The Swiss franc was also up for a fourth day running against the euro. It has gained more than 2 percent in the last week, with dealers citing flows of capital taking shelter from risks due to Britain's vote on EU membership on June 23.
Sterling itself was down around a third of a percent against both the dollar and the euro.
New Zealand's Reserve Bank surprised some investors who had been betting on a rate cut and its concerns over rising house prices and emerging inflationary pressures cooled expectations that the bank will cut soon.
While growth remains shaky and price growth extremely low, along with its Australian and Canadian counterparts, the kiwi dollar has been steadily recovering since reaching long-term lows in January of this year.
By noon in London it was up 1.2 percent at $0.7106, off a high of $0.7148 hit in Asian time.
"The kiwi went on a rampage after the RBNZ kept rates on hold," said Tobias Davis, head of corporate treasury sales at Western Union in London.
"Governor Wheeler's comments centred around data being a decision driver, inflation expectations anchoring and the fact that strong property prices were a cause for concern. We think downside risks remain, along with the chance of a cut in August."
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