LONDON: The Japanese yen rose on Thursday as risk appetite weakened, with investors looking to U.S. Federal Reserve Chairman Jerome Powell's speech at Jackson Hole on Friday.
Minutes of the Fed's July meeting showed policymakers were divided over whether to cut interest rates but united in wanting to signal they were set on more cuts.
The minutes led investors to lower their expectations of big rate cuts from the Fed next month, but bond markets still expect rates to be cut by more than 60 basis points by the end of the year.
While there was no immediate trigger for the weakness in risk-oriented currencies such as the Australian and Canadian dollars, analysts blamed a likely deterioration in overall business sentiment and a renewed drop in bond yields.
Against the dollar, the yen advanced by 0.3% to 106.29 yen, nearing last week's eight-month low of 105.05 yen.
The Australian dollar weakened 0.2% to $0.6768. The Canadian dollar slipped 0.1%.
Sentiment was hurt by a drop in the Chinese yuan to a 11-year low against the dollar, indicating trade tension between the world's two biggest economies remained a major issue.
"Some investors like commodity trading advisors have linked the downward move in the yuan and Chinese stocks to selling cross yen," said Yukio Ishizuki, foreign exchange strategist at Daiwa Securities in Tokyo.
In onshore trading, the yuan fell to 7.0752 per dollar, its weakest since March 2008, before recovering to 7.0732. In offshore trade, the dollar rose 0.29% to 7.0872 yuan.
Major Chinese state-owned banks were seen supporting the yuan by receiving dollar/yuan swaps, traders told Reuters.
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