SINGAPORE (Reuters) – The dollar held off recent highs on Wednesday on lower real yields and fear ahead of the Federal Reserve’s meeting, while other safe-haven currencies were in favor in the wake of a nerve-wracking plunge in Chinese stock markets. .
The Japanese yen, the Swiss franc and the euro maintained Tuesday’s gains throughout the Asian trading session, with the yen trading at 109.80 to the dollar and the euro at $1.1821.
The Chinese yuan bounced back from three-month lows, following posting its worst day since October on Tuesday, but the rebound was modest and risk-sensitive. The Australian and New Zealand dollars also struggled to rally as sentiment remained fragile.
Hong Kong’s Hang Seng Index (.HSI) was flat following experiencing its biggest single-day sell-off in more than a year on Tuesday, when nervousness also spilled over into US markets.
“The fall in Chinese markets had a ripple effect on global sentiment and was the risk aversion session,” said Westpac strategist Emre Spizer.
Gains for the yen, euro and franc combined to shove the US dollar index lower and sat at 92466 on Wednesday.
The decline in real yields in the United States, which hit another record low in 10 years overnight, also cast a shadow over the dollar and the global economic outlook.
Sterling was a stranger and jumped through its 20-day moving average overnight as traders took reports that Britain is considering opening the borders as a sign of more benefits to come. It final sat at $1.3874.
Focus now turns to investors’ position ahead of the Fed meeting.
The dollar enjoyed a month-lengthy rally following a hawkish turn by the Federal Reserve in June and markets are waiting to see if there is more clues this month on the timing of tapering as policymakers confront rising inflation in the US.
Analysts said that hints of a faster end to the unusual policy support could hoist US interest rates and the dollar, while the seemingly dovish Federal Reserve could put pressure on the dollar. The Fed publishes a statement at 1800 GMT followed by a press conference from President Jerome Powell at 1830 GMT.
“While I don’t expect any change in the language of the statement this time, (the Fed) surprised me final time, so I would never say,” said Jeffrey Haley, senior analyst at brokerage OANDA.
“The markets seem to be tilting similarly.”
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Currency display prices at 0456 GMT
locations in Tokyo
spots in europe
Tokyo forex market information from the Bank of Japan
(Tom Westbrook reports). Editing by Sam Holmes
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