Japan's currency has seen a slight gain against the euro after the country's statistics bureau showed a slower decline in consumer prices compared with the previous month.

This morning, the yen traded at 121.25 per dollar, reaching 162.72 against the euro. The currency has the potential to trade at 120.50 against the dollar and 162 per euro, Sue Trinh, currency strategist at RBC Capital Markets, told Bloomberg.

A reduction in carry trades is also believed to have helped buoy the currency to an almost two-week high.

"Carry trade unwinding is the dynamic that has prevailed. The yen is a clear beneficiary," added Ms Trinh.

Meanwhile, the country's Nikkei 225 stock average fell by 1.4 per cent while the Morgan Stanley Capital International Asia-Pacific index shed one per cent on the back of falling US stocks.

Hiroshi Yoshida, foreign-exchange trader at Shinkin Central Bank, said that the slump in shares raised concerns that a global equity sell-off may occur.

The currency may, however, be affected by predictions that the Bank of Japan will move to lift interest rates to 0.75 per cent later in year - marking a 12-year high.