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Dollar briefly slides below ¥118 as China weakens yuan


The dollar briefly tumbled below ¥118 in Tokyo trading on Thursday, as another cut in the yuan’s exchange rate by China fueled risk aversion among investors.

At 5 p.m., the dollar stood at ¥118.02-03, down from ¥118.74-74 at the same time on Wednesday. The euro was at $1.0782-0783, up from $1.0729-0729, and at ¥127.28-29, down from ¥127.40-40.

The greenback moved around ¥118.45 in the early morning and strengthened to around ¥118.70 toward the midmorning.

But soon after China’s central bank announced a reduced reference rate for the Chinese currency for the second straight day, the dollar slid below ¥118 for the first time since late August. At one point, it fell to around ¥117.70.

The dollar remained under the pressure of risk-averse selling versus both the yen and the euro, amid concerns over the Chinese economy, as well as the Middle East situation, Wednesday’s nuclear test by North Korea and falling crude oil prices, traders said.

“It’s not the time to buy the dollar,” said an official at a currency margin trading service provider. “The dollar is expected to seek bottom against the yen.”

Even ahead of the release on Friday of the U.S. government’s closely watched jobs report for December, currency traders are rather focusing on the yuan’s rate.

“The market can’t escape from the risk-off mood unless the yuan stabilizes,” an official at a foreign exchange brokerage house said.

Meanwhile, an official at an asset management firm said, “Strong readings in the jobs data will probably send the dollar higher versus the yen, but any buybacks are likely to be short-lived, due to a number of risk factors.”