SYDNEY The yen held onto chunky gains early on Tuesday, having been squeezed higher as skittish investors dumped riskier assets amid tensions over Russian military intervention in Ukraine.
The euro traded at 139.30 yen after falling 0.8 percent on Monday, while the dollar fetched 101.43 yen not far from a one-month low of 101.20.
Russian President Vladimir Putin's forces have tightened their grip on the Russian-speaking Crimea region, a move described by U.S. President Barack Obama as a violation of international law and of Ukraine's sovereignty.
Obama warned his government would look at a series of economic and diplomatic sanctions that would isolate Russia, which on Monday saw its stocks, bonds and rouble plummet.
The Russian central bank hiked its key lending rates and spent as much as $12 billion of its reserves in a desperate attempt to prop up the rouble.
Heightened geopolitical tensions took their toll on global stocks but traditional safe havens including gold, U.S. Treasuries and German Bunds all rallied.
In the foreign exchange market, the yen was the main beneficiary. The U.S. dollar was also in favour, further helped by a batch of encouraging U.S. economic data.
U.S. factory activity rebounded from an eight-month low last month and consumer spending increased more than expected in January, suggesting the economy was regaining some strength after abruptly slowing in recent months.
"The overall tone of the data is optimistic with the major sentiment surveys surprising to the upside. Hence this should alleviate some of the weather-related concerns and be USD-supportive," JPMorgan analysts wrote in a note to clients.
The euro last stood at $1.3735, having fallen 0.5 percent on Monday. This helped the dollar index climb to 80.063, pulling away from a two-month trough of 79.688 plumbed on Friday.
The Swiss franc, usually seen as a safe haven currency, lost a bit of steam after scaling a two-year peak against the dollar and a one-year high on the euro.
Commodity currencies, which tend to be sold off in times of heightened market stress, showed remarkable resilience. The Australian dollar, for example, edged up to $0.8935 having hit a one-month trough $0.8891.
The focus for Aussie punters is the Reserve Bank of Australia's (RBA) policy review due out at 0330 GMT.
The RBA, however, is almost certain to keep the cash rate at a record low 2.5 percent, having already said last month that it saw a period of stability in policy.
"The currency has been surprisingly resilient despite heavy anti-risk sentiment at the start of the week, which may reflect investors' unwillingness to take directional bets until the RBA announcement is behind them," said Ilya Spivak, currency strategist at DailyFX.
"Once event risk passes, pent-up selling pressure may be released and send the Aussie below support near the 0.89 level to the U.S. dollar."
(Editing by Richard Pullin)