TOKYO- The dollar slipped against the safe-haven yen in Asia on Tuesday on simmering anxiety about higher U.S. bond yields, the Sino-U.S. trade war and political turmoil in Europe.
The yen extended gains against the greenback to a fourth straight session, coming off an 11-month low of 114.55 yen per dollar reached on Thursday last week.
"The rise of U.S. Treasury yields is causing a correction of U.S. equity markets, which is typically a risk averse situation and causes the stronger yen," said Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo.
The dollar shed 0.2 percent to 113.04 yen on Tuesday.
Yamamoto said his view is that while the U.S. economy remains strong the correction of U.S. equity markets and the subsequent fall in dollar/yen should be short-lived.
"The fall of the dollar/yen, typically below 113, is a good chance to buy the dollar on dips," he said.
Against a basket of its rivals, the greenback was steady at 95.774, not far off a seven-week top of 96.127 hit last week.
Yields on 10-year Treasury paper were last at 3.2404 percent on Tuesday, just off a seven-year peak.
The euro traded at $1.1488, close to a seven-week low of $1.1457 reached during the previous session amid discord between Italy and the European Union over Rome's budget plans.
On Monday, the Italian 10-year bond yield rose more than 20 basis points to 3.626 percent, the highest since February 2014, while the country's stock market fell to its weakest since April 2017.
Italian Deputy Prime Minister Matteo Salvini, speaking at a media conference with French far-right leader Marine Le Pen on Monday, denounced European Commission President Jean-Claude Juncker and Economics Commissioner Pierre Moscovici as enemies of Europe.
Against the Japanese currenc, the euro lost 0.15 percent to 129.95 yen, slightly above a near-four-week low of 129.49 yen reached overnight.
The Chinese offshore yuan traded slightly weaker at 6.9263 yuan per dollar after slipping about 0.35 percent overnight.
On Sunday, China's central bank move to inject more liquidity into the financial system, as policy makers stepped up support for the economy in the face of a dimming outlook amid the heated Sino-U.S. trade conflict
A senior U.S. Treasury official said on Monday the United States remains concerned about China's recent currency depreciation.
"U.S. yields are rising, whereas the Chinese authorities are trying to push down the Chinese yield. That's typically a stronger dollar/weaker renminbi situation," said Mizuho's Yamamoto.
"If the stimulus measures...by the Chinese authorities are regarded as positive for the Chinese economy, then it will support the renminbi," he said. "But at the moment, that's not the case."