Euro and yuan strengthen against U.S. dollar

Chinese shares recorded their biggest daily gain in six years on Thursday, helping to restore confidence after the Shanghai Composite and the smaller Shenzhen market shed a third of their value over the past month.

The US dollar edged higher Thursday as Chinese stocks rebounded, soothing traders’ fears that the rapid selloff in that market could wreak havoc on the world economy.

“The FX market is generally taking its cue from overall risk sentiment and so equities are higher today”, said Mark McCormick, currency strategist at Credit Agricole in New York.

Worth noting, from Thursday an additional 194 companies halted their shares from trading in China, according to Bloomberg, to reach 1,439, about half the entire market.

“Gold is getting some support from the stronger euro but if we get a deal with Greece on Sunday, it should be bearish for gold because it removes any risk”, Societe Generale analyst Robin Bhar said. It had lost 0.7 per cent for the week after touching $1,146.75 on Wednesday, its lowest since March 18.

The common currency climbed 1.1 percent against the yen to 135.28 and put on 0.5 percent to $1.1094 as Athens took a step forward by sending a package of reform proposals to its euro zone creditors. It fell as far as 120.410 yen as investors unwound short positions amid a slump in global equities triggered by panic selling in Chinese stocks.

“The yen’s downside is probably limited, because nobody knows what will happen in China, and Japanese stocks are still fragile”, said Kaneo Ogino, director at Global-info Co in Tokyo, a foreign exchange research firm.

A fall in US yields following the release of minutes of the Federal Reserve’s June meeting offered little hope to dollar bulls.

By 0752 GMT, it had recovered to trade up less than 0.1 percent at 96.371.

San Francisco Fed President John Williams said he still believed the Fed will start to hike this year but added he was “wary of acting before gathering more evidence that inflation’s trajectory is on the desired path”.

China’s stock markets have plunged roughly 30 percent over the last three weeks. The euro had fallen back by a quarter of a percent against the dollar by midday in Europe, having topped $1.11 in Asian trade.