The yen initially slipped on Thursday as a recovery in Chinese shares raised some risk appetite, but losses were trimmed as markets looked to US equity markets for direction in thinned holiday trade. Currency traders took cues from a 4.5 percent gain in the Shanghai Composite Index on Thursday, which helped to pull European shares up 1.2 percent.
"Chinese stocks bounced back which helped some higher risk currencies but it's mostly subdued now as the markets are waiting to see whether US stocks bounce back," said Geoffrey Kendrick, senior currency strategist at UBS. By 0938 GMT, the dollar was flat against the yen at 94.11 yen after hitting to a session high of 94.55 yen.
Traders cited options with a strike price around 94.00 yen were set to expire later in the day, keeping the pair near that level. The euro was down 0.1 percent at 133.77 yen, after rising to 134.62 yen earlier. Against the dollar, the single currency was little changed on the day at $1.4232.
Market participants have been focusing on Shanghai stocks after it shed nearly 20 percent in the past two weeks, rattling investor confidence in a global recovery. "It is an understandable reaction as Chinese equities have acted as a good leading indicator for broader market dynamics over the past year," Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ said in a note.
The Norwegian crown jumped, rising against the euro to its highest level since March, after data showed Norway's non-oil economy rose an unexpected 0.3 percent in the second quarter. The euro fell as low as 8.5495 crowns, its lowest since March 24, according to Reuters data. It was last down 0.1 percent at 8.6093. Australia is also seen as another country that may raise rates sooner than most of its G10 peers. The Australian dollar was flat on the day at $0.8303.
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