The U.S. dollar was lower against the yen and the euro in Asian trade Tuesday, as early afternoon weakness in the benchmark Nikkei Stock Index soured risk sentiment and induced buying of the Japanese and eurozone currencies, which are considered haven assets.
At about 0450 GMT, the dollar fell to Y119.05, compared with Y119.27 late Monday in New York. The U.S. currency was also weaker against the euro, which rose to $1.1210 midday from $1.1171 late Monday.
The WSJ Dollar Index, a measure of the dollar against a basket of major currencies, was down 0.23% at 88.74.
The currency market initially was slow to respond to China trade data Tuesday, which showed much faster pace of decline in imports than expected and a decline in exports for the second straight month.
But the stock market stretched earlier losses after the lunchbreak, thus exerting a drag on the dollar against the yen and the euro. The benchmark Nikkei Stock Average was down 1.6% midday, steeper than a 0.8% fall before the lunch break. The Shanghai index was last trading 1.4% lower.
After G-20 finance ministers’ meetings in Turkey last week, “many investors are increasingly feeling that panic selling is set to fade out,” said Mizuho Securities chief FX strategist Kengo Suzuki.
But many are still cautious, as they aren’t sure if the U.S. Federal Reserve will start raising short-term rates later this month or wait longer to act, said Mr. Suzuki, adding that the dollar will likely trade in a range Y118.50-Y121.00 range until the Federal Open Market Committee meets Sept. 16-17.
The Australian dollar, which is resource-related and depends largely on China growth, trimmed earlier gains in keeping with the stock market weakness. The Australian dollar rose to $0.6958 and Y82.84 midday from $0.6924 and Y82.58, respectively.
In other currency trade pairs, the euro was at Y133.44 from Y133.27.