HONG KONG -- The yen pushed higher on Monday as market players cut higher-yielding currencies and awaited any confirmation of reports that embattled US bank Citigroup had cut a deal with the government to warehouse some of its assets.

Analysts said a Citigroup deal with the government could help relieve some of the anxiety surrounding the financial giant that has battered stock markets and helped fuel the slide in the S&P 500 index to an 11-year low last week.

Reports said that Citigroup is considering putting riskier assets in a government-supported "bad bank" to reassure investors that the rest of its $1.2 trillion portfolio is safe.

But any relief will likely prove short-lived as investors are still coming to grips with the depths of an expected global recession next year and the ongoing damage inflicted by the 15-month financial crisis.

"I don't think the news is going to change the overall environment. We are still very much in risk-aversion mode," said Sharada Selvanathan, a currency strategist at BNP Paribas in Hong Kong.

Trading activity was more subdued than usual, with Japanese financial markets closed for a national holiday.

Higher-yielding currencies like the Australian dollar tend to trade in close tandem with stocks on shifts in investors' willingness to take on risky positions.

Both the Aussie and the New Zealand dollar, the bellwethers of the carry trade, fell about 2.0 percent against the yen in early trade.

The low-yielding yen had been widely used as a cheap source of funds to buy higher-yielding currencies in the carry trade.

The dollar fell 0.8 percent from US trade on Friday to 95.18 yen, and the euro was down 0.7 percent at 120.01 yen. Against the dollar, the single currency edged up 0.1 percent to $1.2606.

The Australian dollar shed 1.0 percent to $0.6252, and the Aussie was down about 2.0 percent to 59.53 yen.

The yen retreated on Friday after reports that President-elect Barack Obama planned to nominate New York Federal Reserve President Timothy Geithner as Treasury secretary reassured investors about a smooth transition during the crisis.

Geithner, who serves as the Fed's eyes and ears on Wall Street, has been a key architect in the emergency responses to the crisis.

The S&P 500 soared more than 6.0 percent in a late-day rally. In Asia on Monday, futures on the S&P rose 0.5 percent and pointed to gains later in the day.

Traders said that despite the gloom stemming from the United States, the dollar would benefit from US investors selling some of their huge holdings of foreign assets and hedge funds cutting positions to raise cash before year-end.