Gold prices also edged higher as investors fled stocks and sought safe-haven assets after the U.S. Treasury yield curve inverted for the first time in 12 years and U.S. stocks sold off sharply.
The inversion, where 2-year yields trade higher than 10-year yields, is considered by some analysts to be a sign that the U.S. economy is likely to enter a recession.
In a worrying sign for investors, 10-year Treasury yields slumped to the lowest in three years in Asian trade while 30-year Treasury yields broke below the 2% floor for the U.S. Federal Reserve's policy rate.
Sentiment was already fragile after economic data from China and Germany revealed the extent of the damage the U.S.-Sino trade war is causing two of the world's largest exporters.
Safe-haven currencies, gold, bonds and other low-risk assets could continue to get a boost due to growing worries about the poor health of the global economy.
"When volatility rises, dollar/yen becomes strongly correlated with Treasury yields, so the currency pair has more room to fall," said Junichi Ishikawa, senior foreign exchange strategist at IG Securities in Tokyo.
"I expect other safe havens to rise. The mood is downbeat, because of the trade war and bad economic data."
The dollar was a tad lower at 105.86 yen <JPY=EBS> in Asian trading Thursday. On Wednesday, the yen rallied 0.8% versus the greenback, its biggest daily gain in two weeks.
The dollar index <.DXY>, which measures its value against a basket of six major currencies, stood at 97.955 after a 0.2% gain on Wednesday.
The U.S. Treasury yield curve <US2US10=TWEB> inverted on Wednesday for the first time since June 2007.
In Asian trade, 10-year Treasury yields skidded to the lowest since September 2016 and 30-year Treasury yields fell to an all-time low of 1.9910%.
Spot gold, which is usually bought in times of economic uncertainty, rose 0.3% towards the highest in six years.
Against the dollar, the Swiss franc <CHF=EBS> last traded at 0.9734, holding on to a 0.3% gain posted on Wednesday.
(Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh)
(Reporting by Stanley White; editing by Richard Pullin and Sam Holmes)
By Stanley White