The dollar held near a six-month high as nervousness about China and global growth affected risk appetite, while the yen strengthened as Japan's top diplomat sent a warning about the currency after it earlier fell to a 10-month low.

The yen strengthened as much as 0.4 percent to 147.02 per U.S. dollar after Japan's chief currency diplomat Masato Kanda said he wouldn't rule out the possibility if speculative moves persist, the strongest warning since mid-August.

The Asian currency has hovered around the key 145 per dollar level for the past few weeks, prompting traders to keep a wary eye on hints of intervention from Tokyo.

Kanda, Japan's deputy finance minister for international affairs, has been a central figure in the country's efforts to stem the yen's steep decline since last year.

"The statements suggest intervention could be imminent, with the yen in the intervention zone we saw last year," said Chris Turner, ING's global head of markets and regional head of research for the UK and central and eastern Europe.

Japan intervened in currency markets 12 months ago when the dollar rose above 145 yen, prompting the Treasury to buy yen and push the pair back to around 140 yen.

Against a basket of currencies, the dollar was at 104.77, not far from the six-month high of 104.90 it touched on Tuesday. Economic data from China and Europe on Tuesday stoked some fears of slowing global growth, prompting investors to have some concerns about the U.S. currency.

Tuesday's data from the eurozone and Britain showed a decline in business activity last month, while a private-sector survey showed that services activity in China grew at its slowest pace in eight months in August.

The euro gained 0.1% to $1.0733, having fallen to a three-month low of $1.0705 on Tuesday. Sterling was last at $1.2559. It also touched a three-month low of $1.25285 on Tuesday.

Oil prices settled at a 10-month high on Tuesday as Saudi Arabia and Russia extended supply curbs, although European gas prices are well below highs reached last August.

Federal Reserve Governor Christopher Waller said Tuesday that the latest batch of economic data gives the U.S. central bank room to determine whether it needs to raise rates again, and that he sees nothing that would force it to raise short-term borrowing costs again.

According to the CME FedWatch tool, markets are pricing in a 93% chance that the Fed will keep rates unchanged later this month, and a 55% chance that there will be no more hikes this year.


China's yuan, meanwhile, slumped to a 10-month low against the dollar on Wednesday before paring some losses as state banks offered support.

The Australian dollar rose 0.1% to $0.6385 after sinking 1.3% on Tuesday on weak data from China and after the Reserve Bank of Australia left rates unchanged.

Dollar as safe-haven currency strengthens on global economic growth concerns

The US Dollar is strengthening as a safe haven currency today on concerns about global economic growth, especially in light of developments in China. The Australian dollar is weakening after the Reserve Bank of Australia left interest rates unchanged.

The dollar index, which measures the value of the dollar against a basket of six major world currencies, rose 0.4 percent to 104.69 points around 18:35 CET. The euro lost 0.7 percent to the dollar at the same time to $1.0725 and the Australian dollar lost 1.2 percent to $0.6382.

Chinese services activity grew at its slowest pace in eight months in August, private sector statistics released today showed. The world's second-largest economy continues to be plagued by weak demand and stimulus measures have failed to significantly boost consumption.

Business activity in the euro area is contracting faster than it appeared. This was shown by the revised data for August published today by S&P Global. The dominant services sector is already in decline, which analysts say means the eurozone could be in recession.

"There are growing concerns about a slowdown in global growth, particularly in the case of China and Europe. This benefits the dollar as a safe haven," said Joe Manimboze, an analyst at Convera.

The Reserve Bank of Australia left interest rates unchanged for a third consecutive month today. This has fuelled speculation that the rate tightening cycle is over. Central bank officials had earlier indicated they had rates more firmly under control.


EUR/USD looks very uninteresting to me right now and I think a lot of traders are losing out. It's actually one big sideways trend.

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