The Japanese yen gained half per cent against the dollar on Friday as investors cut back positions on risky assets after a volatile week in global stock markets.

This followed concerns about a trade dispute between the U.S. and China.

Traditional barometers of caution in the currency markets, such as the yen and the Swiss franc are poised for a big week of gains as volatile markets in thin year-end trading marred appetite for risk.

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Weak economic data also weighed, with Japanese industrial output contracting in November and partially reversing gains registered in the previous month, indicating headwinds for the global economy.

“The broad environment is a bit more tentative for risk taking and the dollar looks to be struggling thanks to volatile U.S. stocks,” said Lee Hardman, a currency strategist in London.

The dollar index, a gauge of its value versus six major peers, fell by 0.15 per cent to 96.34, after losing 0.5 per cent overnight.

Data also showed consumer confidence at its weakest in more than three years in the U.S., as well as an unexpected drop in industrial profits in China, a stark reminder for investors of the deteriorating global growth outlook.

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The yen rose by half per cent against the dollar to 110.43 yen and the Swiss franc strengthened 0.2 per cent, poised for its biggest weekly gain in nearly three months.