LONDON: Offshore rates for China's yuan fell to their weakest since a hefty two-day devaluation in August on Tuesday, mirroring a fall in onshore rates, with traders citing strong year-end dollar demand.
Sweden's crown meanwhile hit a nine-month high against the euro as investors bet that the country's economy would continue to improve and that its central bank would hold off from cutting interest rates further for the time being.
Trading was thin during the Christmas holiday season.
The dollar was 0.1 percent down against a basket of major currencies but it strengthened around 0.2 percent against the yuan in offshore trading, to 6.5800 yuan. That was its strongest against the Chinese currency since Aug. 12.
Commerzbank currency strategist Thulan Nguyen, in Frankfurt, said this was a continuation of depreciation trend in the yuan since it was included in the International Monetary Fund's benchmark SDR reserves basket.
"The PBOC (People's Bank of China) is just letting it ease gradually," said Nguyen. "I think they realize now that the best long-term strategy is to let it depreciate, because that will support the economy."
Earlier, the yuan briefly touched a 4-1/2-year low in onshore trade. Traders said it had been dragged down by strong dollar demand, as corporates typically need extra dollars for business settlement at the year-end.
The Swedish crown rose 0.3 percent against the euro to trade at 9.1500 crowns, its strongest since mid-March, shrugging off data showing Sweden's trade deficit widened substantially in November. Separate numbers showed a slight pick-up in lending to Swedish households.
"Before the last ECB meeting there was quite a lot of speculation that the Riksbank would have to act as well because the ECB would become more expansionary," Commerzbank's Nguyen said. "That was taken as an invite by some speculators to drive down euro/stockie."
"The other thing is economically, things are picking up in Sweden ... Several banks and statistics institutes are revising their growth forecasts upwards for Sweden."
The dollar, which has lost steam against its Japanese counterpart after the Federal Reserve hiked interest rates this month, was flat at 120.37 yen, close to a two-month low of 120.05 plumbed last week as weaker oil sapped risk appetite.
"Weak oil prices can push down dollar/yen by continuing to negatively impact high yield bonds, which in turn will worsen overall risk sentiment," said Shin Kadota, chief Japan FX strategist at Barclays in Tokyo.
Sterling rose 0.1 percent to $1.4891, close to a 8-1/2-month low of $1.4806 hit earlier in the month.
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