The dollar pared gains as U.S. stock markets erased advances after China cut interest rates following Monday’s $2.7 trillion global equity wipeout.
The dollar climbed against the Swiss franc, the euro and the yen -- all currencies that investors consider havens in times of market turmoil. Japan’s currency weakened after a Ministry of Finance official said its rally to a seven-month high Monday had been “abrupt.”
“What we’re seeing is a mirror image of yesterday’s moves,” said Omer Esiner, chief market analyst at currency brokerage Commonwealth Foreign Exchange Inc. in Washington.
The dollar trimmed its earlier advance, rising 0.4 percent to 118.83 yen as of 5 p.m. in New York, after slumping to 116.18 on Monday, the weakest since Jan. 16.
The greenback rose 0.9 percent to $1.1517 per euro, bouncing back after Europe’s single currency gained 5.4 percent in the previous four days, the most since March 2009. The Bloomberg Dollar Spot Index rose 0.6 percent to 1,195.19, the biggest gain in six weeks.
China’s central bank cut its benchmark lending rate for the fifth time since November and lowered the amount of cash banks must set aside, stepping up efforts to cushion the stock-market slide and a deepening economic slowdown.
“China has showed that they will continue to use policy interventions to put a floor under their equity market, probably a floor under their currency, and that means that we’re not going to have a global meltdown,” Greg Anderson, Bank of Montreal’s global head of foreign-exchange strategy, said by phone from New York.
Traders have increased the probability of the Fed raising rates at its September meeting to 26 percent, rebounding from as low as 20 percent Monday. The calculation is based on the assumption that the effective fed funds rate will average 0.375 percent after the first increase.