Investing.com - The safe haven yen eased against the dollar on Monday after China’s central bank guided the yuan higher for a second day, but another steep drop in Chinese shares overnight fueled fears over the outlook for the world’s second largest economy.
USD/JPY edged up 0.12% to 117.59, after falling to lows of 116.68 overnight, the weakest since August 24.
Earlier Monday, the People’s Bank of China set the daily midpoint rate for the yuan higher against the dollar. It was the second day the bank guided the yuan stronger, following eight days of weaker guidance.
The move alleviated concerns that weakness in the yuan could indicate that the slowdown in China’s economy is more severe than had been believed.
But shares in China tumbled 5% overnight after the latest inflation figures added to concerns over its economy.
Producer prices slumped in December, indicating that domestic demand is weakening, while consumer prices inched up to 1.6%, from 1.5% in November.
The yen was slightly higher against the euro, with EUR/JPY last at 128.11. The single currency was also lower against the dollar, with EUR/USD down 0.39% to 1.0881.
Demand for the dollar continued to be underpinned following Friday’s robust U.S. jobs report for December.
The U.S. economy added 292,000 jobs last month, after increasing an upwardly revised 252,000 in November. Economists had forecast payrolls to rise by 200,000.
The unemployment rate held steady at a seven-and-a-half year low of 5% in December.
The report bolstered expectations that the Federal Reserve could raise interest rates at a faster pace this year. Higher U.S. interest rates would make the dollar more attractive to yield-seeking investors.
The dollar pushed higher against the traditional safe haven Swiss franc, with USD/CHF rising 0.27% to 0.9973, up from earlier lows of 0.9882.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.23% to 98.69.