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Yen near 7-Month Highs as Rising Geopolitical Risks Rattle Investors

Investing.com - The safe haven yen was trading near seven-month highs against the U.S. dollar on Tuesday as investor sentiment was shaken by a currency crisis in Argentina, unrest in Hong Kong and growing indications that trade tensions are hitting global growth.

The yen was at 105.27 per dollar by 03:23 AM ET (07:23 GMT) after brushing 105.58 overnight, its strongest since Jan. 3.

The Japanese currency, which attracts flight-to-safety flows in times of market stress, has strengthened this month amid increasing signs that the U.S. and China will not reach a quick resolution in their year-long trade war and the prospect of further monetary easing by the U.S. Federal Reserve.

The currency received an additional boost after protesters managed to close down Hong Kong's airport on Monday amid ongoing demonstrations. Surprise primary election results in Argentina, which resulted in a rout in the country's peso currency, stocks and bonds, have also added support.

"It's the 'risk off' in the market generated by events in Hong Kong and Argentina that is feeding demand for the yen," said Yukio Ishizuki, senior currency strategist at Daiwa Securities. "Speculators are increasing their long positions on the yen."

"There really are no signs of the yen's advance abating," Ishizuki added. "The next target is the yen's high reached against the dollar early in January, but even that threshold won't present much of an obstacle at this rate."

The euro was weaker against the dollar, down 0.2% at 1.1188, handing back the previous day's modest gains.

The single currency had edged higher on Monday after Italian bond yields pulled back from five-week highs on relief that rating agency Fitch left the country's credit rating unchanged.

Longer-term prospects for the euro remain grim with the European Central Bank widely expected to ease policy as early as September and on lingering concerns towards Italy, where its deputy prime minister and right-wing League party leader Matteo Salvini has called for early elections.

The Australian dollar was little changed at 0.6756 as the Chinese yuan found a bit of traction after the People's Bank of China set a midpoint rate at a fresh 11-year low but a level that was firmer than expected.

The Aussie had lost 0.5% the previous day, slipping in sympathy with the yuan amid little sign of progress in U.S.-China trade relations. The Aussie is sensitive to developments in China, Australia's largest trading partner.

Argentina's peso was trading at 53.00 per dollar on Tuesday, having lost roughly 15% of its value to 52.15 per dollar on Monday after crumbling to an all-time low of 61.99 earlier.

The selloff came amid fears of a possible return to interventionist policies, and by extension a possible debt default after conservative Argentina President Mauricio Macri lost by a much wider-than-expected margin to the opposition in presidential primaries.

--Reuters contributed to this report

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