The yen rose on Tuesday as dollar short covering eased on a recovery in the price of gold and other commodities, and as investors awaited economic data for clues about when the Federal Reserve will stop raising interest rates.
The yen climbed to a seven-week high against the euro as traders unwound long positions that have kept the single European currency in the vicinity of a record peak against the yen and a one-year high versus the dollar.
A recovery in commodity prices, which posted their biggest one-day fall in 18 years on Monday, put pressure on the US currency, dealers said, adding that the dollar could stay at the mercy of commodities in the near term.
"The market is focusing on commodity prices, so if prices for, say, gold stay under pressure, we could see some more short covering in the dollar," said Hideaki Furumaya, forex manager at Trust and Custody Services Bank.
The dollar rebounded on Monday to mark its largest one-day gain in a month against the euro, after a broad-based plunge in commodities.
Few in the market believe the dollar's woes had reversed given expectations that the Fed is poised to stop tightening credit, as well as speculation that Washington may allow the dollar to fall further to help reduce its huge trade deficit.
"That is making investors hesitant to buy the dollar aggressively," said Nobuo Ibaraki, forex manager at Nomura Trust and Banking. "Sentiment for the dollar is clearly bearish."
Treasury Under-secretary Tim Adams said on Monday that the United States did not seek to manipulate its currency for competitive reasons and currency values should be set by markets and reflect fundamentals.
The dollar was at 110.00 yen, down from a session high around 110.90 and 0.5 percent lower than the level in late US trade on Monday. It crept closer to an eight-month low of 109.31 yen hit late last week.
Traders said that dollar selling by Japanese exporters added to the currency's woes.
Gold was around $683.50 per ounce, up around $6 from a one-week low hit earlier in the session. Gold prices have sunk since hitting a 26-year high of $730.00 on Friday. The Reuters/Jeffries CRB index of commodities fell 2.7 percent on Monday, the biggest one-day drop in 18 years.
The euro was up 0.2 percent at $1.2825 after touching the day's high around $1.2840. The single currency was at 141.05 yen after slumping to 140.88 yen, its lowest level since late March.
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