LONDON (Reuters) - The dollar rose against the safe-haven yen and Swiss franc on Monday, regaining some poise as European and Japanese stock markets started the week with gains, helping bolster risk sentiment.
Volumes waned in the European session with the United States closed for a national holiday.
And with Chinese stocks ending in the red after a four-day holiday, most investors were cautious before the monthly update on China’s economic health in the coming week, with August global trade data out on Tuesday unlikely to offer much solace.
At the G20 meeting at the weekend, policymakers agreed to oppose competitive devaluations and communicate policy shifts in a more transparent way, but they gave investors little insight into future macro trends.
On Friday, a mixed U.S. jobs report gave few clues to investors trying to determine when the Federal Reserve will finally hike interest rates.
The dollar was up 0.3 percent against the yen at 119.35, moving away from the day’s low of 118.66 and taking back some of Friday’s 1 percent tumble. It was up 0.4 percent against the Swiss franc at 0.9750.
The euro was slightly firmer at $1.1155, having gained in recent weeks as investors unwound euro-funded carry trades in which they borrowed euros to invest in high-yielding currencies.
“While there was some weakness in Chinese stocks, it wasn’t a capitulation, which many had feared. So investors are not as risk averse, with Japan’s Nikkei closing with gains,” said Jeremy Stretch, head of currency strategy at CIBC World Markets.
“So the dollar remains a buy as the non-farm payrolls was reasonably constructive.”
U.S. nonfarm payrolls increased less than expected last month, marking a slowdown from July’s upwardly revised gain, but the jobless rate dropped to its lowest in almost 7-1/2 years and wages accelerated.
The figures came amid anxiety about falling global stock markets and China’s slowing economy, which have led investors to pare back bets that the Fed will raise interest rates as early as its meeting this month.
China’s foreign exchange reserves marked their biggest drop on record in August as Beijing tried to halt a slide in the yuan and stabilize financial markets after its surprise move to devalue the currency last month.
The drop was much smaller than some had expected, but analysts said that the euro - a big beneficiary in the past decade when reserves were rising - would suffer.
“Over a period of time, depending upon the way the Chinese rebalance their reserves, it will have an impact on the major currencies,” said Geoffrey Yu, currency strategist at UBS.
In a study released last week, Deutsche Bank analysts estimated that for every $100 billion reduction in global reserves, the euro would fall by 3 cents against the dollar.
Editing by Hugh Lawson