Dollar Declines Amid China Easing Hopes

The U.S. dollar declined in Asian trading hours on Tuesday, with investors hoping for fresh easing measures from the Chinese central bank.

The ICE dollar index , which measures the dollar against a basket of six currencies, traded at 79.522, from 79.595 in late trading the previous session.

“Foreign exchange looks to be taking its cues from Shanghai, which is up 2%,” said Michael Turner, strategist at RBC Capital Markets, referring to the benchmark Shanghai Composite Index.

Investors stepped up positions in assets viewed as residing on the riskier end of the spectrum on Tuesday, with Asian stocks jumping, after the People’s Bank of China injected a large dose of liquidity into the Chinese banking system, raising optimism for further policy moves. Read: Shanghai, Hong Kong stocks jump to lead Asia

China’s central banking chief highlighted worries that the mainland economy is facing big downward pressure and said monetary policy must remain flexible and set with a preemptive bias to help counter the weak external environment. Read: PBOC’s Zhou pledges flexible policy.

“There have been some modest signs of improved risk appetite during the Asian session with markets able to shrug off the as-expected IMF forecast revisions,” added Turner at RBC. Read: IMF cuts 2012, 2013 global growth forecasts.

The euro reached $1.2983, from $1.2973, while the British pound  traded at $1.6041 from $1.6031 and the Australian dollar  advanced to $1.0232, from $1.0177 late the previous session.

Against the Japanese currency , the dollar reached 78.39 yen, from ¥78.32 in late North American trading on Monday.

Marketwatch

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