dollar dipped against the yen on Tuesday

reuters-The dollar dipped against the yen on Tuesday, reversing earlier modest gains as Asian equities tottered and put the safe-haven Japanese currency in favor.

Trading was subdued due to the closure of U.S. markets on Monday for a holiday. The dollar lost 0.2 percent to 119.00 yen JPY=, sliding from a high of 119.53 as Japanese and Chinese shares declined and dented risk appetite.

Japan’s Nikkei .N225 fell 1.7 percent, dragged lower as Shanghai stocks .SSEC dropped in wake of disappointing Chinese import data.

Earlier, the greenback had managed to pull out from an overnight low of 118.66 thanks to Monday’s gains by Japanese and European equities.

The euro gained 0.2 percent to $1.1190 EUR=.

“In terms of dollar/yen, it has been led back and forth by equities – particularly the impact of Chinese shares on Japanese stocks,” said Koji Fukaya, president of FPG Securities in Tokyo.

“The correlation might last a few weeks, depending on what Chinese authorities further do to shore up stocks, macroeconomic data, and performance by U.S. equities. We are not at a full blown financial crisis, so that is preventing many participants from going long outright on the yen,” he said.

The euro fell 0.1 percent to 133.180 yen EURJPY= and edged closer to a four-month low of 132.24 touched on Friday.

“The yen has not only benefited from risk aversion but it is becoming the safe-haven currency of choice. The euro also attracted safe-haven bids before, but it has lost its luster after hints of more easing by the European Central Bank,” Ishikawa said.

Sterling managed to pull away as bargain hunting set in after the currency tumbled to a four-month low, driven by last week’s disappointing services sector report that added to doubts over whether the Bank of England would be able to raise interest rates any time soon.

The pound rose 0.2 percent to $1.5298 GBP=D4 after hitting the four-month trough of $1.5163 on Friday.

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