By Sarah Turner, MarketWatch
SYDNEY (MarketWatch) — The U.S. dollar dipped in Asian trading hours Tuesday after reports that China may step in to buy Italian bonds helped calm market nerves frayed by Europe’s ongoing debt woes.
The dollar index DXY -0.05% , which measures the greenback against a basket of six other currencies, traded at 77.044, down from 77.543 in late North American trading on Monday.
The dollar can be regarded as a safe haven in times of market turmoil, and investors flocked the currency as risk appetite evaporated Monday.
“Fears [about] the euro zone’s crisis and the risk of a credit shock combined with fears about the flagging global demand to ensure no let-up in the gloom that has gripped global markets for much of the past six weeks,” said strategists at Brown Brothers Harriman.
The Japanese yen is also viewed as relative safe haven, and at one point on Monday, the euro dropped to ¥103.88, its lowest level since mid-2001 against the Japanese currency.
Still, after reports that China may invest in Italy came out late Monday, the European currency traded at ¥105.39 EURJPY -0.42% , up from ¥105.06 hit in the previous session.
The euro EURUSD -0.16% reached $1.3685 against the dollar on Tuesday, rising $1.3586 in late trading the previous day.
“Speculation of China potentially buying Italian debt saw a bid spread through risk assets,” said Chris Weston, strategist at IG Markets.
“China has around $3.3 trillion of forex reserves, and it is in their interest to see Europe do well, as it is their biggest trading partner, with around 30% of its exports going there,” Weston said.
The British pound GBPUSD -0.13% traded at $1.5864, up from $1.5816.
The dollar USDJPY -0.23% bought ¥77.01, slipping from ¥77.37 in late trading on Monday.
Sarah Turner is MarketWatch's bureau chief in Sydney.
