| NEW YORK
NEW YORK The dollar fell to a more than one-year low against the Japanese yen JPY= on Wednesday as crude oil prices dropped near a 13-year trough, the U.S. stock market tumbled, and risk appetite waned.
The U.S. currency recovered slightly in afternoon trading, but remained down 0.6 percent at 116.94 yen after hitting a session low of 115.96 yen.
"Overnight, the yen was appreciating on global equities selling off everywhere and oil also following," said John Doyle, director of markets at Tempus Consulting in Washington.
"Equities here in the United States are getting crushed - carnage would be the word - so the safe-haven yen has been the beneficiary of this sell-off in global equities."
Investors said the yen could climb as high as 110 per dollar this year, said Karl Schamotta, director of FX strategy and structured products at Cambridge Global Payments in Toronto, as many anticipate the Bank of Japan will not employ additional stimulus measures or accelerate its quantitative easing program.
"That's a fairly substantial reversal from where we were," Schamotta said, "and certainly I think that the bazooka that (Japanese Prime Minister Shinzo) Abe was deploying last year has run out of ammunition."
Further bolstering the yen versus the dollar was data showing U.S. consumer prices unexpectedly fell in December. That suggests inflation may be slow to rise toward the Federal Reserve's target and that the dollar's value will unlikely increase.
But oil's continued slide also pushed traders out of commodity currencies and into the dollar.
The dollar index .DXY, which measures the greenback against six major currencies, rose modestly to 99.102, up about 0.1 percent, as investors unwound positions in currencies like the Australian AUD= and New Zealand NZD= dollars.
The Aussie fell as much as 0.98 percent, and the kiwi shed as much as 0.99 percent against the greenback during the day. Both, though, pared losses in the afternoon session.
The dollar also rose sharply against oil-linked currencies like the Brazilian real, Norwegian crown and Russian rouble, which fell to its lowest since redenomination in 1998.
The Canadian dollar CAD=D4 was the day's most erratic currency. The loonie gained a full cent earlier in the session against the U.S. dollar after the Bank of Canada decided to keep its 0.5 percent overnight target interest rate unchanged, but surrendered the gains soon after.
It most recently looked set to end a 13-day losing streak against its U.S. counterpart, with the U.S. dollar down 0.6 percent to C$1.4485.
(Reporting by Dion Rabouin)