Dollar hits near 3-month low at lower 118 yen

Investors once again flocked to the safety of the yen on Tuesday as a modest pick-up in risk appetite gave way to jitters over Chinese market turbulence and stalling growth and the breakdown in relations between Saudi Arabia and Iran. “With the yen well supported and the New Zealand dollar seemingly out of favour this year, NZD/JPY fell below the 80 mark”. “Global weakness could throw a wrench against another USA rate hike”, said Joe Manimbo, senior market analyst with Western Union Business Solutions in Washington.

The dollar had hit an 11-week low against the Japanese currency on the first trading day of the year as Chinese share prices slid and traders ran for the traditional security of the yen and the Swiss franc. Nervousness about the ongoing contraction among Chinese manufacturers despite Beijing’s surprise currency devaluation in August sent traders to embrace the yen.

The dollar slipped 0.1 per cent to 119.32 yen after losing as much as 0.7 per cent overnight, when it plumbed an 11-week low of 118.705.

EUR/JPY was last at 128.02, off 1.04% for the day after falling to lows of 127.74 earlier, the lowest level since April 21.

The euro stood little changed at $1.0752 after shedding 0.8 percent overnight, when it a one-month low of $1.0711.

On the stock market, the Korea Composite Stock Price Index (KOSPI) was down 0.7 per cent at 1,916.77 points.

The latest worrying news on China came in a private survey which showed activity in China’s services sector expanded at its slowest rate in 17 months in December, bucking robust findings in an official survey and a further indication that the world’s second-largest economy may be losing steam.

“The last thing Europe needs is low inflation”.

The euro remained on a soft note versus the yen and the dollar after the eurozone’s lower-than-expected inflation data for December raised expectations about further monetary easing by the European Central Bank, dealers said.

Among other European currencies, the Swedish crown fell against the euro and dollar after the country’s central bank gave its governor the power to intervene immediately to weaken the crown in a bid to stimulate the country’s economy. Japan’s Nikkei .N225 bucked the trend and rose 0.2 percent.