Investing.com - The safe haven yen rallied more than 1% against the euro on Tuesday, surging to eight-month highs and was also stronger against the dollar as market turbulence in China and heightened geopolitical tensions fanned widespread risk aversion.
EUR/JPY was last at 128.02, off 1.04% for the day after falling to lows of 127.74 earlier, the lowest level since April 21.
Global equities surrendered early gains as weak economic reports from China in recent days rekindled persistent fears over a China-led slowdown in global growth.
China injected 130 billion yuan into the banking system on Tuesday to stabilize its equity and currency markets, which recorded the worst opening day's trade in years in the previous session, but investors remained wary.
Risk sentiment was also hit by a growing rift between Iran and Saudi Arabia, following the execution of a prominent Saudi Shia cleric.
The euro fell to the day’s lows after data showing that the annual rate of inflation in the euro zone rose less than expected last month.
The euro zone’s statistical bureau Eurostat reported that the annual rate of inflation in the region rose just 0.2% in December, matching November’s reading and falling short of forecasts for an increase of 0.3%.
Lower energy costs were the largest factor contributing to low inflation, with annual energy costs down 5.9%, according to the report.
Core inflation, which strips out food and energy costs rose 0.9% in December, below forecasts for 1.0% and matching November’s reading.
The weak data added to pressure on the European Central Bank to step up measures to bolster price and economic growth in the single currency bloc. The ECB targets annual inflation of close to, but just below 2%.
The yen was also higher against the dollar, with USD/JPY sliding 0.31% to 119.11, not far from the two-and-a-half month low of 118.69 set on Monday.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.55% to 99.49, boosted by the weaker euro.