Dollar gains against Yen, but weakens vs. Pound

The dollar advanced against the yen Tuesday as worries about China’s stock selloff abated somewhat, but the buck fell against the pound after the latest reading on U.K. economic growth matched expectations.

Some stabilization by Asian stocks prompted nervous investors to loosen their grip on the perceived safety of the Japanese currency.

The dollar USDJPY, -0.01% was up at ¥123.73, compared with ¥123.24 late Monday in New York.

With the Shanghai Composite Index SHCOMP, -1.68% down by as much as 5% earlier Tuesday during Asia trading hours, investors had been looking to pick up the Japanese currency earlier in the session. However, stocks gained momentum in China, with Shanghai shares closing with a more moderate loss. Investors tend to sell the Japanese currency, a safe haven asset, when episodes of geopolitical or financial instability fade.

“They snapped up the yen when Shanghai stocks fell 5% in the morning, but now we are seeing an unwinding of those moves,” said Gaitame.com Research Institute senior researcher Takuya Kanda.

Many investors, however, are still remaining cautious about the direction of the Chinese stock market or another slide in the near term that makes it easier to cause an unwinding of riskier asset positions.

In other currency trade, the pound GBPUSD, +0.0000% GBPUSD, +0.0000% rose 0.4% to $1.5616 after preliminary U.K. government data showed the economy grew 0.7% in the second quarter, and by an annualized rate of 2.8%.

“This goes some way to supporting the hawkish stance taken by Bank of England officials last week when referring to the potential for an interest rate hike by the turn of the year,” said Alex Edwards, currency analyst at UKForex, in a note.

The dollar EURUSD, +0.0090% was higher against the euro, which was down 0.4% to $1.1044.

The WSJ Dollar Index BUXX, -0.01% a measure of the dollar against a basket of major currencies, was little changed after falling about 0.4% on Monday.

Source: MarketWatch