SYDNEY: The safe-haven yen nursed losses early on Friday, while currencies such as the Australian dollar staged a modest rebound thanks in part to a turnaround in risk sentiment that saw Wall Street and oil prices bounce off lows.
The greenback popped back above 118.00 yen, pulling well away from a four-month trough of 116.70 plumbed on Monday.
The euro climbed to a one-week high of 128.75 yen, before drifting off to last stand at 128.24. US stocks rebounded on Thursday as oil prices snapped an eight-day rout, driving the S&P 500 up 1.7 percent - it's biggest one-day gain in over a month.
"While there was no obvious catalyst for the improvement in risk sentiment, the return of relative stability in the CNY is probably contributing to this tentative easing of market tensions," analysts at BNP Paribas wrote in a note to clients.
The yuan has depreciated more than one percent since the start of the year, having lost 4.7 percent against the dollar last year.
The accelerated slide had alarmed markets, but the relative stability this week has calmed fears of a sustained depreciation for now.
The euro gave up a bit of ground against the greenback, dipping back below $1.0900 from a session high of $1.0943.
It last stood at $1.0870.
The European Central Bank said it saw scope for further cuts in its deposit rate in minutes of its December meeting, yet many ECB policymakers appeared sceptical about the need for further action in the near term.
The pullback in the euro helped lift the dollar index to 99.067, from 98.590.
It was up 0.5 percent on the week. Investors also bought the beaten-down Australian dollar amid a slight improvement in risk sentiment.
The Aussie came within a whisker of 70 US cents, from a four-month trough of $0.6910. It was last at $0.6990.
Worries about slowing growth in China had weighed heavily on the Aussie, which is often used as a liquid proxy for China plays.
It suffered a 4.5 percent drop last week, but has since steadied with a 0.4 percent gain this week.
Sterling held its ground after Bank of England policymakers voted 8-1 to keep interest rates at a record low as expected and offered no great change to the bank's outlook despite ructions on global markets.
The pound traded at $1.4415, holding above a 5-1/2 year trough around $1.4352 set earlier in the week.
In contrast, growing expectations of an interest rate cut by the Bank of Canada kept the loonie under pressure.
The Canadian dollar was last at C$1.4355 per USD, near a fresh 12-year trough of C$1.4398 set overnight.
There is no major economic data out of Asia on Friday, leaving much of the focus on China and developments elsewhere.
US retail sales are due later in the day.
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