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Yen rises as traders seek shelter from currency turmoil

The yen firmed sharply against the dollar and the euro as investors fled to the traditional Japanese safe haven amid sinking emerging-market currencies.

NEW YORK: The yen firmed sharply against the dollar and the euro on Friday as investors fled to the traditional Japanese safe haven amid sinking emerging-market currencies.

The euro, meanwhile, fell against the greenback, buying $1.3678 around 2245 GMT, down from $1.3695 on Thursday.

The dollar dropped to 102.30 yen from 103.24 the prior day and the euro fell to 139.92 yen from 141.39.

"Today's volatility was triggered by something we did not expect to occur this week, which was the massive liquidation out of emerging-market assets," said Kathy Lien of BK Asset Management.

Worries about growth prospects in China, following the HSBC report earlier this week that Chinese manufacturing contracted in January, fed unease about emerging-market economies in general and a sell-off in their currencies.

The Turkish lira continued to plunge, hitting a record low against the dollar Friday despite a massive central bank intervention the prior day.

Russia's ruble hit a record low against the euro and sank against the dollar to a nearly five-year low. Argentina's peso crashed 11 per cent on Thursday, its biggest drop since 2002.

The heightened worries drove a global equity rout that left US stocks down two per cent on Friday, with the Dow tumbling the most in seven months.

Lien said the upcoming week's most important risk event is the Federal Reserve's monetary policy announcement on Wednesday, with investors on tenterhooks to see if the Fed will continue cutting its massive monetary stimulus.

Many analysts expect the central bank's Federal Open Market Committee will cut another $10 billion from monthly asset purchases. In December the FOMC said it would begin tapering the stimulus by $10 billion to $75 billion a month in January.

"The Fed policy uncertainty means continued volatility for currencies," Lien said.

The dollar strengthened against the British pound, which bought $1.6483 compared with $1.6638 Thursday.

The Swiss currency, another traditional haven amid economic uncertainty, rose against the greenback. The dollar fell to 0.8945 Swiss franc from 0.8972.

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