Investing.com - The yen neared three-month highs against the dollar on Wednesday and hit multi-month highs against the other major currencies as more weak Chinese economic data and concerns over a possible North Koran nuclear test boosted safe haven demand.
USD/JPY hit overnight lows of 118.37, the weakest since October 15 and was last at 118.70, off 0.31% for the day.
Risk sentiment remained weak after data showing that China’s service sector expanded at the slowest rate in 17 months in December.
The Caixin China services purchasing managers’ index ticked down to 50.2 from November’s 51.2, compared to forecasts for a reading of 52.3.
The report came after a similar survey earlier in the week showing that Chinese manufacturing activity contracted for the tenth straight month in December, and added to fears over the outlook for the world’s number two economy.
In addition, China’s central bank set the yuan midpoint rate at a much lower level than Tuesday’s close, sending the yuan to fresh five year lows against the dollar.
The move fueled fresh speculation that Beijing is aiming to devalue the currency as the economy slows.
The yen has strengthened in recent sessions as a selloff in Asian stocks prompted increased demand for the relative safety of the Japanese currency.
Investors were also alarmed by reports of a possible nuclear test in North Korea.
The yen rose to fresh eight-month highs against the weaker euro, with EUR/JPY hitting overnight lows of 127.20.
The single currency was close to three-week lows against the dollar, with EUR/USD at 1.0733 after weak euro zone inflation data on Tuesday added to pressure on the European Central Bank to step up measures to bolster price growth.
The pound also remained on the back foot amid concerns over risk from a referendum on whether to remain in the European Union.
Sterling hit 14-month lows against the yen, with GBP/JPY down 0.62% to 173.6 and was at eight-month lows against the greenback, with GBP/USD down 0.23% to 1.4636.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was steady at 99.54, holding just below Tuesday’s one-month highs of 99.73.