The safe-haven Japanese yen kept overnight gains against the dollar as concerns about slowing global growth and U.S.-Sino trade tensions drove investors away from risky assets.
Slackening global demand is one of the factors that is expected to see the Bank of Japan cut its inflation forecasts and stick to its ultra-easy policy at its rate review later in the day.
The yen, widely considered a safe-haven during times of market turmoil or economic stress, pushed up slightly against the dollar at 109.4, adding to a 0.5 percent gain in the last session.
"Nervousness around global growth and trade tensions is certainly a factor driving the markets right now," said Michael McCarthy, chief markets strategist at CMC Markets.
"Markets have also seen a spectacular run since late December..so the recent correction in equities can also be due to positioning."
On Monday, the International Monetary Fund (IMF) cut its 2019 and 2020 global growth forecasts, citing a bigger-than-expected slowdown in China and the Eurozone, and said failure to resolve trade tensions could further destabilize a slowing global economy.
Growth in China last year was the slowest since 1990 and investors are hoping for a breakthrough in U.S.-Sino trade talks, with the tariff dispute between the world's largest economies already rippling through financial markets and global demand.
A report by the Financial Times that the United States had rejected China's offer for preparatory trade talks dampened risk sentiment overnight.
Since Prime Minister Theresa May's divorce deal with the EU was rejected by lawmakers last week in the biggest defeat in modern British history, lawmakers have been trying to plot a course out of the crisis, yet no option has the majority support of parliament.
"The market is now completely discounting the prospect of a hard Brexit, though the political risk still remains in play and volatility is sure to ratchet higher if no clear path is visible to the market," said Kathy Lien, managing director of currency strategy at BK Asset Management,
Reference: CNBC