The dollar hit a three-month high against a broadly weaker yen on Tuesday, with the recent correlation between falling stocks and yen strength broken after the exhaustive unwinding of risk-sensitive assets. Outside of strength versus the yen, the dollar fell against a basket of six major currency rivals as U.S. stock futures pointed to a higher Wall Street open -- having hit a 12-year closing low on Monday. World stocks as measured by MSCI's world equity index hit their lowest in almost six years .MIWD00000PUS, while the FTSEurofirst 300 Index fell 1.7 percent on the day .FTEU3. The link between the yen gaining as a perceived safety bid when stock markets tumble has been taken over by worries about Japan's sharp economic downturn and a lack of convincing policy steps eroding confidence. "The driving factor behind some of the yen weakness has been domestic developments in Japan...,figures have looked pretty bad and there has also been political turmoil. Taken together this has weighed," said Phyllis Papadavid currency strategist at SG in London. "Also long positioning has also been quite chunky for quite some time. It could be that some people are unwinding positions," she added. While some analysts have concluded that unwinding of the yen-financed carry trade is complete, others are not so sure. "It's not unprecedented for the yen to break down in terms of its relationship with stocks. When that happened last year, it held for several weeks, but when it re-established itself it did that with a vengeance," said Adam Cole, global head of FX research at RBC Capital markets in London. By 1220 GMT, the dollar was up 1.5 percent at 95.86 yen, having earlier hit a three-month high at 95.89 yen , according to Reuters data. The euro climbed to a seven-week high of 122.78 yen . Sterling rose 1.6 percent to 139.20 yen while the Australian dollar gained 2.0 percent to 61.90 yen.

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