The dollar pared losses after hitting 17-month lows against the yen on Monday, as Japan again warned that it could intervene in the market to weaken the Japanese currency. Gains in global stock markets and a rebound in oil prices have also diminished the allure of safe-haven currencies such as the yen, which fell for the first time versus the dollar in seven days.
But it was the warning by Chief Cabinet Secretary Yoshihide Suga on the yen's recent gains which spurred traders to unwind some one-sided trades on the dollar-yen. Suga said overnight that the Group of 20's agreement to avoid competitive devaluations did not mean Japan cannot intervene against currency moves, repeating language which has flagged intervention in the past.
"While the comments sent the yen lower overnight, the overall nervousness in global markets continues to keep the Japanese currency's safe-haven allure in high demand," said Omer Esiner, chief market strategist at Commonwealth Foreign Exchange in Washington. In mid-morning trading, the dollar was little changed at 108.00 yen. Earlier the dollar fell to a 107.64 yen, the lowest since October 2014. The greenback has fallen three straight weeks against the Japanese currency. The yen also fell against the euro, which rose 0.4 percent to 123.69 The dollar index was down 0.5 percent at 93.819.