Dollar gets respite vs yen

Brazil rules out selling United States dollars reserves to damp fx volatility, repo an option-source.

“The source of the current crisis-uncertainty regarding Chinese policy-is still very much there”, said Chris Turner, head of currency strategy at ING Groep NV in London.

In Tokyo, the U.S. unit changed hands at 119.62 yen, up from 118.84 yen in New York late Tuesday, as investor confidence picked up. About $8 trillion in market value has been erased from share markets worldwide since China’s central bank began devaluing the yuan on August. 11. Meanwhile, A radical leftist opposed to Greece’s new bailout deal won a presidential mandate on Monday to try to form a new government but immediately admitted he would fail, pointing towards a snap election. The Aussie dollar is trading at 0.7196 recovering a bit after falling to the 0.70 level on Monday.

By many popular measures, the dollar has traded sideways for the last six months. Brent added 2.4 percent to $44.16. The Fed Chair Janet Yellen has repeatedly stated that a strong labor market could make rate hikes sooner and the data coming out is the main catalyst for the timing of the first interest rate hike.

UK rates are now not expected to start rising until the middle of next year.

The single currency has been boosted in recent sessions as investors fled to the relative safe-haven currencies amid intense volatility in markets. The ICE dollar gauge fell 0.7 per cent in the same period. “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”.

There is nothing in the way of market-moving data out of Asia on Monday, leaving the focus squarely on Chinese stocks.

Inflation has fallen to around zero in many economies and near-term inflation forecasts have had to be lowered further as a result of the continued sharp decline in commodity prices, in particular oil prices.

Dow Jones closed down by 3.56 percent, S&P 500 ended down by 3.92 percent, Nasdaq finished the day down by 3.81 percent.

“China’s decision to cut reserve requirements by 50bp (0.5 percentage points) will be regarded by many investors as overdue but nevertheless reassuring”, analysts at JP Morgan said in a note.

One of the Fed’s criteria to raise rates is “a levelling out of the trade- weighted dollar”. The Euro was able to drive the Pound to an over three-month low over the course of the European session, although Sterling has since recouped some of its losses.

The euro has been trading in a $1.08-$1.14 range versus the dollar since mid-April.

Meanwhile, the spread between the Brent and the WTI crude contracts stood at $5.01 a barrel by close of trade on Friday.