US dollar stabilizes after sharp fall

SAN FRANCISCO (Oc 24)  But the most significant move in the foreign exchange market was in China's closely-controlled yuan, which continued its week-old climb to its highest point against the greenback.

At 2200 GMT on Wednesday (0900 AEDT Thursday), the euro was at $US1.3775, down slightly from $US1.3780 late on Tuesday.

The US dollar slipped on the Japanese currency, falling to Y97.32 from Y98.12, but gained on the British pound, the pound trading to $US1.6164 from $US1.6234 a day earlier.

The euro also fell on the yen, to Y134.10 from Y135.23.

Kathy Lien of BK Asset Management said both the US dollar and the yen were bid up as safe havens after news that Chinese bank bad loan write-offs tripled in the first half of the year.

"Investors are looking at the increase as a big red flag for Asia's largest economy and while it reveals some of the country's deeper problems, the write-offs are also part of the new government's overall strategy to clean up their books and bring default ratios to international standards," she said.

Independent of that is the Chinese currency's move: the yuan, or renminbi, was up 0.2 per cent for the day, moving to 6.083 yuan per US dollar, and has moved nearly 0.7 per cent since October 13, after holding steady since May.

A year ago it was at 6.25 per US dollar.

There was no clear reason for the gain, though it came after the political crisis in Washington that barely avoided forcing the US into default on its debt, and may have influenced Beijing's views of its huge exposure to the greenback in its reserves.

It could also reflect rising demand as the yuan moved into the top 10 most traded currencies globally, according to the Bank of International Settlements last month.