• Kyodo

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The U.S. dollar recovered to the ¥120 line Wednesday in Tokyo, helped by an early rebound in Tokyo stocks, but its upside later remained capped amid falling stocks and lingering concern about the health of the Chinese economy.

At 5 p.m., the dollar fetched ¥120.05-08 compared with ¥119.33-43 in New York and ¥120.05-08 in Tokyo at 5 p.m. Tuesday. It moved between ¥119.37 and ¥120.46 during the day, changing hands most frequently at ¥120.27.

The euro was quoted at $1.1257-1259 and ¥135.15-19 against $1.1310-1320 and ¥135.13-23 in New York and $1.1319-1321 and ¥135.90-94 in Tokyo late Tuesday afternoon.

The dollar-yen pair was swayed largely by volatile trading of Tokyo stocks, dealers said.

Traders initially bought back the dollar, driving the U.S. currency more than ¥1 higher from its late overnight level in New York to around ¥120.40 in the morning, as risk appetite increased with a rebound in the 225-issue Nikkei despite sharp falls in U.S. and European equities overnight.

But as the Nikkei gradually trimmed its early gains and ended lower reflecting weak Chinese stocks, the dollar turned top-heavy around the ¥120 line, temporarily sliding into the ¥119 zone.

Higher stocks often boost traders’ risk appetite and dull moves to the perceived safety of the yen.

“Rises in stocks encouraged buybacks of the dollar in the morning. But once stocks turned top-heavy, there were little incentive for buying (the dollar,)” said Shinichiro Kadota, foreign exchange strategist at Barclays Bank, referring to persistent concerns about a slowdown in the Chinese economy.

Market players’ immediate attention is on the ADP National Employment Report due out later in the day, as it is seen as a bellwether for the crucial U.S. nonfarm payrolls report to be released Friday.

“What the market is concerned about the most right now is when global financial markets will truly restore calm and when the Federal Reserve will raise interest rates, in September or later,” Kadota said, adding that U.S. economic data are therefore expected to draw attention for hints regarding the timing of the Fed’s next move.

The euro fell versus the dollar ahead of the European Central Bank’s monetary policy meeting on Thursday, with eyes on what ECB President Mario Draghi will say at a post-meeting press conference, amid speculation about possible additional monetary easing later this year, dealers said.

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