September 8, 2015 / 12:22 AM / 3 years ago

Dollar mixed as rallying stocks encourage risk taking

NEW YORK (Reuters) - The dollar was mixed on Tuesday as rallying stock markets and positive German economic data gave global investors reasons to throttle down the risk aversion tactics that recently boosted the euro and yen.

A woman walks past a money exchange shop in Kuala Lumpur, Malaysia, August 25, 2015. REUTERS/Olivia Harris.

The dollar, which traders said was unlikely to move much until Sept. 17, when U.S. Federal Reserve policymakers may announce an interest rate increase, gained against the yen, fell against sterling and had changed little by day’s end versus the euro.

U.S. stocks gained more than 2 percent after weak economic data out of China bolstered hopes of more stimulus measures from the Chinese government.

Chinese stocks ended nearly 3 percent higher, and European stocks .FTEU3 were up 1.2 percent.

German exports and imports hit record highs in value terms in July, suggesting foreign appetite for goods from Europe’s largest economy remained robust despite the slowdown in China, while domestic demand also was holding up well.

Positive data from Europe’s biggest economy would traditionally boost the euro, but the currency has in the past jittery months benefited by acting as something of a safe haven, as investors unwound euro-funded positions in riskier but higher-yielding currencies and bought back the single currency.

    With stocks up, the euro fell victim to a renewed appetite for risk that also hurt the yen.

    The euro recovered from early losses and was last flat against the dollar at $1.1166 EUR=, while the yen shed 0.6 percent against the dollar to trade at 120 yen JPY=. The euro was down 0.75 percent against sterling EURGBP=.

    “The market is trading more risk-on across the board,” said BNP Paribas FX strategist Sam Lynton-Brown in London.

    The dollar index .DXY traded in a tight range and was last off 0.15 percent.

    “Volumes are very light, and we are not seeing much conviction either way (on the dollar’s direction),” said Douglas Borthwick, managing director at Chapdelaine Foreign Exchange in New York. “We are really seeing sideways trading.”

    Investors are focused on next week’s Fed policy meeting. Many had expected the Fed would announce the first rate hike in almost a decade at this month’s meeting, but those expectations have faded as worries over the health of the global economy have grown.

    Reporting By Michael Connor in New York

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