The yen rose against major currencies on Friday, benefitting from concerns about the global economy that sent Asian shares lower and made investors more averse to taking risks.
Trade was subdued given few major economic events ahead of the weekend and the Chinese New Year holidays next week, though that exaggerated moves in the market, traders said.
The Japanese currency hovered near a 13-½ year high against the dollar and stayed in sight of a seven-year peak against the euro hit earlier this week due to global banking woes.
Gains in the yen picked up after Tokyo's Nikkei share average .N225 extended losses, dropping 3.8 percent to mark a two-month closing low on a dour outlook for corporate earnings.
The MSCI index of Asia-Pacific stocks outside Japan .MIAPJ0000PUS shed over 2 percent.
"There is a move towards risk aversion against countries with fragile economies, notably Europe and the U.S.," said Toru Umemoto, chief FX strategist at Barclays Capital.
But he also said the dollar was holding firm against currencies other than the yen partly due to swift and drastic economic steps in the United States.
Traders said that U.S. economic fundamentals are weak after a run of bleak data but the market's spotlight was on the souring economy in Europe, with Britain and the euro zone facing pressure to lower interest rates further.
They said the yen continued to be well-bid as a relatively safe currency because investors' risk appetite remained low on worries about the deepening global recession.
Market players were on the lookout for any comments from Japanese authorities about possible currency intervention to stem the yen's rise.
Japanese Finance Minister Shoichi Nakagawa said on Friday that he was watching financial markets very carefully.
Economic problems in the United States and Europe were affecting Japan's stock and currency markets, Nakagawa told a news conference.
