The markets, after withstanding a number of smaller blows, finally succumbed to an unrelenting stream of negative news Wednesday, following a New York Times report that Trump asked then-FBI Director James Comey to end his investigation into Trump's former national security adviser, Michael Flynn, a day after he resigned in February.
In response, traditionally safer assets rallied as investors sought shelter from the political headwinds surrounding Trump and what many on Wall Street hoped would be the swift implementation of the Republican Party's business-friendly tax cuts.
It fell to a three-week low of 110.53 yen early on Thursday before bouncing back slightly to 111.25 yen JPY= , up 0.5 percent from late USA levels on bargain-hunting by Japanese investors.
The dollar recovered around half a percent against the yen in Asian trading after a combination of recently poor US data and revelations about the investigation of Trump's ties to Russian Federation drove its biggest daily fall since last July.
In late NY trading, the euro rose to 1.1155 dollars from 1.1094 dollars, and the British pound climbed to 1.2963 dollars from 1.2925 US dollars in the previous session.
USA stock market declines accelerated in afternoon trading, and major US indexes ended near session lows. The dollar fell by as much as 1.45 percent against the yen, beaching through the 112 yen level to last trade at 111.00 yen.
Switzerland's safe-haven franc hit its highest since November's US election and Britain's Brexit-bruised pound broke through the $1.30 barrier for the first time since late September after reassuring retail sales figures.
MSCI's gauge of stocks across the globe fell 1.2 percent, while European shares ended down 1.4 percent.
On the currency markets, the dollar was down 0.6% against the euro and 0.35% lower against the pound.
Oil prices dropped after data showed an increase in US crude inventories, stoking concerns that markets remain oversupplied despite efforts by top producers Saudi Arabia and Russian Federation to extend output cuts. It's all being put well on the back burner and even off the stove. AUD/USD dipped 0.15% to 0.7415.
On the other hand, USA economic data published on Tuesday was mixed, raising more doubts about some rosy views on the US economy. The KBW Nasdaq Bank Index of large US commercial lenders notched its worst day since the Brexit selloff, falling 4.1%.
With Treasury yields falling the gap between USA and German government debt yields reached its narrowest in more than six months on Wednesday as a tumultuous week in Washington contrasted with a sense of improved political stability in Europe.
In the meantime, the current bout of risk aversion has brought safe havens back in favour with traders.
The yield on the benchmark 10-year U.S. Treasury note fell to 2.216% from 2.329% Tuesday - its biggest one-day drop since June 27, when investors dumped stocks following the United Kingdom vote to exit the European Union.
Stephen has over 25 years of experience in the financial markets and specializes in Asian currencies at OANDA.
June 2017 3-year bond futures contract at 98.21 (implying a yield of 1.79pct), unchanged from Wednesday.
Spot gold was at $1,260 an ounce having hit $1,263.02, its highest since May 1 the previous session.
Brent crude slipped 0.3 percent to $52.05 a barrel.
Recent data out of the U.S. has been on the soft side, and without the prospect of an impending growth boost to the American economy from fiscal measures, it would only require one bad jobs report to jeopardise a summer rate hike.