Dollar Rises Versus Yen as Easing China Rout Lifts Risk Demand

Updated on

The dollar rose for the first time in four days versus the yen as a selloff in Chinese stocks and commodities slowed, lifting demand for riskier assets.

The greenback gained against the euro as U.S. stocks and yields on government bonds climbed as the Federal Reserve holds a two-day meeting to consider raising interest rates. The New Zealand dollar led commodity currencies higher, with its Australian counterpart rising for the first time in five days.

“It seems like a bit of an unwind of what we saw yesterday, where the 8.5 percent fall in Chinese equities really led to risk off across the board,” Ian Gordon, a foreign-exchange strategist at Bank of America Corp. in New York, said by phone. “People are probably just adjusting positions ahead of the Fed tomorrow.”

The dollar rose 0.3 percent to 123.56 yen as of 5 p.m. in New York, and gained 0.3 percent to $1.1060 per euro. The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 major peers, was little changed at 1,203.84.

New Zealand’s dollar rose 1.3 percent to 66.87 U.S. cents. It extended gains during morning Asia hours even after Reserve Bank of New Zealand Governor Graeme Wheeler said the currency needs to depreciate further to support economic growth.

The Australian dollar added 1 percent.

Rout Abating

Traders have scaled back bets on higher-yielding assets in recent days amid a slump in commodity prices that saw oil close in a bear market on Monday and a rout in Chinese equities.

Crude snapped a four-day slump, and a Bloomberg measure of commodity prices inched higher. Stocks in Shanghai declined 1.7 percent; Hong Kong’s Hang Seng Index rose.

That’s eased speculation that global turmoil may delay the Fed’s plans to raise rates this year.

Policy makers begin a two-day meeting today to discuss monetary policy amid a patchy economic recovery. The probability that the Fed will raise interest rates at this month’s meeting is 2 percent, rising to 74 percent by year-end, based on futures data compiled by Bloomberg.

“The reason you’re seeing things a little calmer today is people have taken money off the table because things have moved a lot,” said Matt Derr, a foreign-exchange strategist at Credit Suisse Group AG in New York. Investors are looking for “just any kind of signals that they could move,” he said, referring to the Fed.

A measure of consumer confidence in the U.S. slipped to its lowest since September.

“It is a bit of a shocking number and that’s taken some of the wind out of the intraday recovery in the dollar,” Matt Weller, an analyst at Gain Capital Holdings Inc.’s Forex.com unit in Grand Rapids, Michigan, said by phone. “But traders are going to remain focused on the Fed as the marquee event of this week.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE