FRANKFURT – The dollar and the yen found modest support Monday, with both currencies gaining a little ground on the euro on safe-haven flows as global equity markets dropped after China's move to cool home prices and due to worries about the impact of automatic U.S. federal spending cuts.
"There's a sense that everyone got out of bed the wrong side this morning and European stock markets have opened lower. There is also a risk-off tone to the FX markets with the yen clawing back some recent losses and the [Australian and New Zealand dollars] both sharply weaker," said Kathleen Brooks, research director at Forex.com.
The ICE dollar index (DXY), a measure of the greenback's performance against six other major currencies, was at 82.382, up a shade from 82.265 Friday.
The WSJ dollar index , a measure of the currency against a slightly wider basket, edged up to 73.25 from Friday's close of 73.21.
U.S. stock-index futures pointed to a slightly weaker open for Wall Street, with strategists citing a bloodbath in Chinese property stocks and concerns about the impact of automatic U.S. federal spending cuts that began to take effect on Friday. See: Stock futures lower on China worries.
The dollar (USDJPY) was fetching Yen93.54 in recent action, compared with Yen93.58 in the U.S. late on Friday. The euro (EURJPY) was trading at Yen121.64, down from Yen121.87.
Earlier, both the euro and the U.S. dollar came off the day's highs after mainland Chinese stock markets opened to steep losses.
The State Council, the Chinese government's cabinet, had late Friday imposed fresh measures to curtail property-price increases as part of efforts to keep home prices affordable to the masses. (Read more about the stock action in Asia Markets: http://www.marketwatch.com/story/japan-stocks-surge-as-asia-shares-sink-2013-03-03.)
The yen often tends to appreciate when stocks sell off.
Meanwhile, Haruhiko Kuroda, the Japanese government's nominee to be the Bank of Japan's next governor, told lawmakers Monday that it would be difficult for the central bank to buy large quantities of foreign bonds under current international rules on currencies, according to a Reuters report.
A purchase of bonds denominated in a foreign currency by the Bank of Japan could potentially weaken the yen, a move that would aid local exporters but might hurt their competitors elsewhere.
The yen's reversal came even as Kuroda also reportedly said that the Bank of Japan's current asset-purchase program wasn't enough to end an era of falling prices and achieve the central bank's target of a 2% year-on-year increase in consumer prices.
Euro holds above $1.30, for now
Meanwhile, the euro struggled to stay above the psychologically important $1.30 handle, after briefly dropping below that level over the weekend.
The shared currency bought $1.3003, down from $1.3066 late Friday, when a set of downbeat manufacturing and employment data from Europe dragged on the currency.
Brown Brothers Harriman global head of currency strategy Marc Chandler mentioned the outcome of the recent elections in Italy as a cause for uncertainty over the euro-zone outlook.
"There is concern that the vote in Italy marks the end of the latency phase induced by the European Central Bank's commitment to do what is necessary to preserve the monetary union," Chandler wrote in a note to clients.
Chandler said that after the euro's drop below $1.30 for the first time since mid-December, technical analysis put the research house's next target near $1.2880.
Among other major currency pairs, the British pound (GBPUSD) traded at $1.5048, edging up from $1.5028.
The Australian dollar (AUDUSD) changed hands for $1.0143, down from $1.0197, while the New Zealand currency (NZDUSD) remained 0.1% lower versus its U.S. counterpart at 82.18 U.S. cents.
The antipodean currencies are particularly sensitive to developments in China, which is a primary consumer of commodities produced by both countries.
