The safe-haven Japanese Yen strengthened on Wednesday, while more volatile currencies such as the Australian Dollar and the British Pound struggled.

This shift occurred as investors sought refuge after a significant drop in Wall Street and substantial losses in Asian markets.

The main trigger appeared to be weaker US manufacturing data, which heightened concerns about a potential severe economic downturn in the US. Traders were already anxious in anticipation of important monthly payrolls data due on Friday.

“The bears are back with a bang,” according to Michael Brown, senior research strategist at Pepperstone.

“It does, however, speak to the heightened sensitivity of participants to incoming data, particularly downside surprises.”

The Yen rose by as much as 0.4% to 144.89 per Dollar, but later traded up around 0.2% at 145.15 at the time of writing. This followed a 1% increase against a generally stronger Dollar overnight.

The Dollar-Yen exchange rate often mirrors long-term US Treasury yields, which fell by nearly 7 basis points overnight and continued to drop during Asian trading hours, reaching 3.8253% as investors sought the security of bonds, Reuters news agency reports.

Despite this, the Dollar remained strong against most other major currencies.

Sterling remained unchanged at $1.3117, after a 0.23% decline overnight. Meanwhile, the Euro gained 0.13% to $1.1058, recovering from a 0.26% drop in the previous session.

Elsewhere, the Australian Dollar fell an additional 0.13% to $0.67025, prolonging the 1.2% fall from Tuesday after previously dropping 0.4%.

Furthermore, in India, there was little change for the Rupee as declining oil prices and a dovish outlook from the Federal Reserve offset the negative sentiment in the market.

At the time of writing, the Rupee stood at 83.9575 to the US Dollar, compared to 83.9625 in the prior session.