TOKYO: The dollar held steady against the yen and euro Tuesday after rallying on newfound confidence across world markets thanks to a pick-up in oil prices and easing concerns about China's yuan.
Crude soared Tuesday for a third day on reports that of an expected meeting between key producers Saudi Arabia and Russia planned for later in the day, fanning hopes for a possible output cut to prevent prices diving further.
But while higher risk asset classes from commodities to equities were enjoying some rare attention, analysts warned the volatility that has characterised 2016 so far could soon return.
"Markets haven't wiped out wariness," said Hiroyuki Yamamuro, an analyst at Ueda Harlow in Tokyo.
"A new theme is needed to shrug off risk sentiment-driven moves. This week's slew of US data may help shift focus to fundamentals if the figures are positive."
In Tokyo, the dollar rose to 114.83 yen from 114.60 yen in London, while the euro was at $1.1153 compared with $1.1146. That compares with 113.25 yen and $1.1250 at the end of last week.
The yen has risen more than five percent against the dollar this year as traders flee to safe investments to protect themselves from the turmoil that has rattled global markets.
The Japanese unit was also weighed by speculation that the Bank of Japan would unleash more stimulus after a poor fourth-quarter Japanese economic growth reading on Monday.
Europe's single currency was quoted at 128.08 yen against 127.78 yen. The unit fell in European trade after the head of the European Central Bank hinted at more stimulus to kickstart the bloc's economy.
Currency traders are pulling back from bets on another devaluation of the yuan as China strengthens support for the unit and prospects for a US interest-rate increase dim.
On Monday, the unit surged more than one percent against the dollar, its biggest rise in more than a decade, after the country's central bank chief said there was no reason the beleaguered unit should fall further.
The yuan stood at 6.4944 to the dollar Monday, up more than one percent from February 5 -- the last trading day before a week-long holiday. It eased slightly to 6.5145 on Tuesday.
"For the short term, I wouldn't fight this trend," Adam Cole, head of global foreign-exchange strategy at Royal Bank of Canada in London, told Bloomberg News.
"China is very much at the centre of the risk-off moves we have seen, anything which puts a floor on the expectations from China clearly has global implications.
"Longer term we still have major concerns over China but for the moment it backstops risk sentiment and that's negative for the yen and euro."
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