Yen surges as global market rout extends ahead of Yellen testimony

The Japanese yen extended gains against the dollar and the euro on Wednesday as nervous investors fled to safe investments with equity markets plunging on concerns about the global economy. With volatility returning to bourses around the world, attention turns to an address to congress by Federal Reserve boss Janet Yellen later in the day, with expectations she will sound a cautious tone on the bank's interest rate policy. "Her hope would be to unwind some of the bearishness that has engulfed asset markets, and this would be supportive for US dollar, rates and equities," Steven Englander, Citigroup's New York-based global head of Group-of-10 currency strategy, wrote in a note. "However, at times market pessimism is so deep-seated that good news is viewed only as an opportunity to sell at better levels," he said, according to Bloomberg News. The greenback bought 114.60 yen, slumping from 115.14 yen in New York Tuesday. The yen, which is considered a safe bet in times of uncertainty and turmoil, has surged more than five percent against the greenback this year. Investors have all but shrugged off the Bank of Japan's decision on January 29 to adopt a negative interest rate policy -- effectively charging banks to park their cash with it -- in a bid to ramp up lending and boost the economy. The dollar had jumped to 121 yen after that announcement, from about 119 yen prior. The move also sent yields on 10-year Japanese government bonds into negative territory for the first time Tuesday, having sat at above 0.2 percent the day before. The euro was at 129.48 yen compared with 130.04 yen, while it also bought $1.1295 against $1.1293. The US unit had gone into 2016 on a high, less than two weeks after the Fed hiked interest rates for the first time in almost a decade. Growing expectations the Fed will hold off hiking rates again soon has also provided some support to emerging market currencies, with the South Korean won up 0.7 percent against the dollar while the Australian dollar added 0.1 percent. Indonesia's rupiah rallied 1.2 percent after a pick-up in economic growth at the end of last year raised hopes for 2016 and fuelled talk of a much-needed uptick in foreign inflows. "People have been bearish Indonesia for some time and now they’re seeing it’s performing much better on a fundamental basis," Wai Ho Leong, a senior regional economist at Barclays in Singapore, said.