* Dollar, euro sink to seven-week low against safe-haven yen
* Investors brace for more losses after Friday’s rout
* Fears of impact of China’s credit tightening weigh on markets
By Lisa Twaronite
TOKYO, Jan 27 (Reuters) - The yen rocketed to a seven-week high against the dollar in early Asian trading on Monday, driven by fears of a continued flight from emerging markets as tighter credit conditions in China threatened to put the brakes on the world’s second-biggest economy.
After Japan’s Nikkei share average dropped 1.9 percent to a one-month low on Friday, investors braced for more losses, with Nikkei futures down 3.2 percent. MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.1 percent in early trade after losing more than 1.0 percent on Friday.
The dollar slipped as low as 101.77 yen early on Monday, its weakest level since Dec. 6, and was last trading at 102.07 yen, down 0.3 percent. The yen has strengthened more than 2 yen over the past three sessions, as Japanese stocks withered in line with their global counterparts.
The euro also fell to a seven-week low of 139.25 yen and last bought 139.60 yen, down about 0.3 percent on the day.
“The combination of the drop in U.S. and Japanese equities, and the sharp decline in U.S. bond yields, helped accelerate the short squeeze, which was already helping the yen recover,” strategists at Brown Brothers Harriman said in a note to clients.
“Renewed yen weakness would seem to require a move back up in U.S. yields and/or recovery in the equity markets,” they added.
On Wall Street on Friday, all three major stock indexes dropped for a second consecutive session, with the Standard & Poor’s 500 index shedding 2.0 percent.
The yield on benchmark 10-year Treasuries notes fell as low as 2.706 percent on Friday, its lowest intraday level since Nov. 26. It stood at 2.722 percent in early Asian trade.
Tightening credit conditions in China as the government seeks to curb growth in high-risk lending heightened fears about a possible slowdown in Asia’s economic powerhouse.
Argentina, meanwhile, abandoned support of its peso on the open market last week, sending the currency skidding to its biggest drop since the 2002 financial crisis.
Latin American stocks tumbled to a 4-1/2-year low on Friday.
Spot gold was seen sticking close to last week’s lofty levels, after hitting a two-month high on Friday and marking its fifth consecutive weekly gain