The dollar fell against the yen in Asian trading Wednesday amid rekindled concerns about a worldwide slump in stocks. Traders also reported that some players were unwinding so-called yen-carry trades.
The U.S. dollar slid to 116.16 yen midafternoon Wednesday, down from 116.52 yen late Tuesday in New York. The euro fell to US$1.3195 from US$1.3196.
From the start of the Asian session, the dollar underwent a selling binge against the yen after the Dow Jones industrials fell 1.97 percent overnight. Japan's Nikkei 225 also fell, dropping nearly 3 percent.
Contributing to the drop were investors reversing yen-carry trades, which involve borrowing yen at Japan's low interest rates to invest in higher-yielding assets elsewhere. As the yen appreciates, however, the profits on this trade gets squeezed. And as investors repay yen loans, that also strengthens the yen.
While the dollar later recouped some of the losses on bargain-hunting by Japanese importers, the renewed concerns over stock prices may continue to weigh on the U.S. currency, traders said.
"The previous fall was led by stock price declines in Chinese markets. But this time, the U.S. triggered the lower share values," said Hidenori Kato, a senior dealer at Societe Generale, reports AP.
"In addition to some more unwinding of yen-carry trades, many players may probably cover yen-short positions," he said. Fears about a dearth of positive U.S. economic news in the near future are also casting a cloud on the dollar's outlook, he added.
The dollar was higher against other Asian currencies. It rose 0.91 percent to 48.715 Philippine peso and 0.52 percent to 44.315 Indian rupee.
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