The
dollar eased against the safe-haven yen and the low-yielding euro on
Monday as investors around the world knocked down equities and
trimmed bets against currencies popularly used to fund risky carry
trades.Under
carry trades, investors sell a low-yielding currency to buy riskier,
higher-yielding ones for better returns. When volatility rises in
global financial markets and stocks fall, they tend to take these
positions off the table.
The
pan-European FTSEurofirst 300 shares index posted its worst monthly
performance since August 2011 with a 9 percent loss, in part because
U.S. policymakers appear to be nearing interest rate hikes.
Stock
markets in China and Japan also fell, with Wall Street indexes down
about 0.80 percent in late New York trading and en route to the
biggest monthly decline in more than three years.
"Stock
markets are in focus, and absence of risk appetite is acting as a
headwind to the dollar," said Nordea FX strategist Niels
Christensen.
Volumes
were relatively low. London was shut for a holiday, and traders were
awaiting Friday's key U.S. employment report for August which may
hint at whether the Federal Reserve will lift interest rates in
September.
Fed
Vice Chairman Stanley Fischer said in a speech on Saturday that U.S.
inflation was likely to rebound as pressure from the dollar fades,
allowing the Fed to raise rates gradually.
That
revived ideas of a September rate hike and helped the dollar rise
against some other currencies, such as the British pound and the
Swiss franc, according to Win Thin, global head of emerging markets
at Brown Brothers Harriman & Co in New York.
"Fischer
pushed back against the dovish sentiment," Thin said, "and
that gave the dollar some traction."
The
dollar index, which tracks the greenback against a basket of six
major currencies, was down 0.20 percent on the day and nearly 1.5
percent lower for the month. It was well above a seven-month low of
92.621 reached a week ago as the prospect of a slowdown in China sent
global stocks plunging.
The
dollar shed 0.4 percent to 121.19 yen, down about 2.2 percent for
August but well above a seven-month low of 116.15 touched a week ago.
The euro rose 0.5 percent to $1.1236 , below last week's high of
$1.1715 but still up 2.4 percent for the month.
The
dollar was up 0.4 percent against the Swiss franc to 0.9657 franc and
off 0.3 percent against the pound at $1.5342.
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