The dollar slipped in Asia Wednesday, pulled down by a decline on the Japanese stock market and illustrating that currency players remain wary of volatility in global markets.
The dollar was trading at 116.36 yen mindafternoon, down from 116.67 yen late Tuesday in New York. The euro rose to US$1.3126, from US$1.3121.
As Japanese stocks fell, U.S. hedge funds and securities firms quickly decreased their dollar holdings fearing that the decline of Tokyo stocks could lead to downturns elsewhere, traders said.
The yen's appreciation and market volatility caused some players in recent days to unwind their yen-carry trades, pulling money out of higher yielding assets outside Japan purchased with yen borrowed at very low interest rates. An appreciation in the yen erodes the profits from such trades.
"When markets are volatile like now, it's nonsense to engage in carry trade because it isn't profitable at all," said Michiyoshi Kato, a senior trader at Mizuho Corporate Bank.
The dollar also dipped as the market awaits U.S. February jobs data, released Friday, for better indications of the outlook for the U.S. economy, reports AP.
The dollar was mixed against other regional currencies, slipping to 9,204 Indonesian rupiah from 9,220 the previous session, but climbing to 44.469 Indian rupee from 44.19, and to 948.4 South Korean won from 947.6.