© Reuters. Illustration photo of U.S. Dollar and Japan Yen notes
By Hideyuki Sano
TOKYO (Reuters) – The dollar fell to four-month lows against the yen on Tuesday as investors cut exposure to risky assets as Washington struggled with a partial government shutdown and open confrontation
The dollar fell 0.27 percent to 110.12 yen
U.S. stocks are plunged more than two percent during a holiday-shortened Monday trade, as developments in Washington added to investors' concern about a slowdown in the global economy next year.
"People are saying this is a black christmas, "said a veteran currency trader at a major Japanese bank.
Wall Street's volatility index (), which measures implied volatility of stocks and often seen as investors' fear gauge, jumped to 36.10, the highest since feb 6, when it briefly shot up as high as 50.30.
US President Donald Trump blasted the Federal Reserve on Monday, describing it as the "only problem" for the U.S. Federal Reserve Chairman Jerome Powell.
"If it is becoming more realistic, that would undermine the Fed's independence as a central bank and a definite confidence in the dollar," said Trump Ayako Sera, market economist at Sumitomo Mitsui Trust Bank
As a sell-off in equities escalated, US Treasury Secretary Steven Mnuchin hosted a call with the president's Working Group on Financial Markets, a body known colloquially as the "Plunge Protection team".
But holding such a meeting, which is usually not used during times of heavy market volatility, did little to soothe the market. Some said the move may have been backfired by hurting investor sentiment.
Trump is thus sparred with top Democrats in Congress over the partial shutdown of the U.S. Government on Monday, with no sign of tangible efforts to reopen agencies.
Washington's latest problems come on the heels of a major sell-off in global shares since early October on worries about Sino-U.S. tensions, higher U.S. Interest Rates and Waning Boost from Trump's tax cuts to the U.S. economy.
With many markets closed for Christmas, other currencies were hardly traded on Tuesday. The euro was little changed at $ 1.1410 (), having gained 0.33 percent on Monday.
Safe-haven assets, as well as the Swiss franc and gold, were supported, though they have not been traded on Tuesday.
The Swiss franc rose 0.9 percent on Monday, its largest daily gain in 11 months to 0.9858 franc per dollar
Commodity currencies faced fresh pressure as oil prices tumbled more than 6 percent on Monday.
The Canadian dollar traded at C $ 1.3600 per US dollar
The Australian dollar fetched $ 0.7053