LONDON: The dollar was moderately higher against the yen and the euro in Asian trade Thursday as the Chinese central bank’s continued effort to guide the yuan lower was met with a milder reaction than previous sessions.
Resource-related, risk-sensitive currencies such as the Australian dollar also showed more moderate reaction than the wide fluctuations seen after China’s decision to devalue its tightly controlled currency jolted global financial markets earlier this week.
Around 0450 GMT, the greenback was at Y124.47, compared with Y124.21 late Wednesday in New York. The U.S. currency was also stronger against the euro, which declined to $1.1140 midday from $1.1158.
The WSJ Dollar Index, a measure of the dollar against a basket of major currencies, was up 0.08% at 88.40.
Earlier in the morning, China’s yuan opened weaker as China’s central bank guided its currency lower for a third day. The People’s Bank of China said later that it has the ability to maintain a stable yuan and again dismissed the view that there is any economic basis for continued yuan weakness.
A relatively calmer reaction in the currency market shows how “investors are gradually learning how China will handle this issue,” said Mizuho Securities chief FX strategist Kengo Suzuki.
“A feeling of relief has started to spread,” with the latest action now being interpreted as part of China’s financial reforms given busy political events such as China president Xi Jinping’s visit to the U.S. in September and speculation over whether the International Monetary Fund will consider including the yuan in its group of reserve currencies, or special drawing rights, later this year.
