- The dollar fell to two-month lows against the safe haven yen on Monday as unease over turmoil in emerging markets fostered increased risk aversion.

USD/JPY hit 101.66, the weakest since December 6 and was last down 0.26% to 101.76.

The pair was likely to find support at 101.25 and resistance at 102.40, the session high.

Demand for the safety of the yen continued to be underpinned by fears over a crisis in emerging markets and concerns over a possible slowdown in China.

Official data released over the weekend showed that China’s manufacturing purchasing managers’ index ticked down to a five month low of 50.5 in January from 51.0 the previous month, in line with market expectations.

A separate report on Monday showed that China’s official services PMI slowed to 53.4 month, from 54.6 in December.

Emerging markets have been hard hit in recent sessions by concerns over the impact of reductions in Federal Reserve stimulus and fears over slowing growth China.

Rate hikes by central banks in India, Turkey and South Africa last week did little to shore up their currencies, while the Hungarian florint was trading close to two-year lows against the dollar on Monday, amid speculation that Hungary’s central bank will soon need to hike rates.

The euro also slid to two-month lows against the broadly stronger yen. EUR/JPY hit lows of 137.35, the weakest since November 26 and was last down 0.24% to 137.40.

In the euro zone, data on Monday showed that the region’s manufacturing sector continued to recover in January.

The euro zone manufacturing PMI rose to a 32-month high of 54.0 in January, up from 52.7 in December and a shade higher than the preliminary estimate of 53.9.

The pick-up was attributed to a rise in in new orders, leading to a higher backlog of work and increased job creation across the sector.

Germany saw strong growth, with its manufacturing PMI rising to a 32-month high of 56.5, up from the preliminary estimate of 56.3. However, France continued to lag with its manufacturing PMI rising to a four-month high of 49.3, remaining below the 50 level that separates contraction from expansion.

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