The yen neared a four-month high against the dollar on Friday as global stock markets plunged again, triggering a rush into traditional safe-haven currencies.

The worsening risk sentiment and higher volatility also means many market players are now being forced to close their existing positions rather than making new bets.

The dollar slipped to 108.56 yen, edging near its four-month low of 108.28 hit on Jan. 26, and having lost 1.3 percent so far this week.

A break of that level could open the way for a test of its 2017 low of 107.32.

Before this week's market mayhem, one of the most popular trades in the currency market was to buy the euro on expectations of unwinding of stimulus by the European Central Bank and to sell the yen on the view that the Bank of Japan will be the last to exit from its ultra-loose policy.

"Given the troubles in stock markets, market players will likely continue to reduce their positions for now," said Minori Uchida, chief FX analyst at the Bank of Tokyo-Mitsubishi UFJ.

According to data published last week from U.S. financial watchdog Commodity Futures Trading Commission, speculators had record long position in the euro while their net short position in the yen remained elevated after hitting near four-year high in November.

The yen also tends to be bought at time of economic stress, because Japan's current account surplus tends to give protection to the yen compared to vulnerability of deficit-running countries.

The euro stood at $1.2248, slipping further from its 3-year high of $1.2538 hit on Jan. 25.

The common currency was down 1.6 percent for the week, which, if sustained by the end of Friday, would be the largest weekly decline since November 2016.

The British pound gave up more than a half of its Thursday's gains made after the Bank of England said it was likely to raise interest rates sooner and by more than it thought only three months ago.

Cable stood at $1.3932, off Thursday's high of $1.4067 though it kept some distance from this week's low of $1.3838.

The rapid slide in global shares and other riskier assets has also boosted buying of the Swiss franc, which strengthened to a four-month high of 1.4448 franc per euro on Thursday.

Against the U.S. dollar, the franc traded at 0.9350 franc per dollar, edging near last week's two and a half year-high of 0.9257.

The flight to safe-haven currencies could continue if stock markets continue to slide.

U.S. stocks plunged around 4 percent on Thursday in another dramatic session, confirming a correction that has thrown the market's nearly nine-year bull run off course.

"Aside from the debate on whether stocks were in a bubble or not, one thing that is certain is that their pricing was based on the assumption that long-term bond yields will stay low. Whether risk assets can withstand rising long-term bond yields will determine the course of the currency markets," said BTMU's Uchida.

U.S. Treasury yields rose, with the 10-year U.S. Treasuries yield hovering at 2.839 percent, just shy of its four-year high of 2.885 percent touched on Monday, as the BoE's stance added to expectations of reduced central bank stimulus globally.