Dollar rises against euro amid China market turmoil

[NEW YORK] The US dollar rose Tuesday as US stocks fell for the sixth straight session on worries about China's economy and market volatility.

With Wall Street stocks tumbling, the dollar's rebound from steep losses Monday came under some pressure.

But the greenback was up about 0.5 per cent against the euro in late afternoon trade, as the euro fell to US$1.1518 from US$1.1606 around the same time on Monday. Earlier in the day it had fallen as low as US$1.1397.

China stepped up efforts to stem an equities rout that has run since June, including fresh interest rate cuts that take effect on Wednesday, but Shanghai shares plunged 7.6 per cent Tuesday, adding to an 8.5 per cent drop the day before.

"Investor sentiment still remains fragile and yesterday's sell-off did a lot of technical damage which is unlikely to be repaired with today's news alone," said Boris Schlossberg, currency strategist at BK Asset Management.

The recent market turmoil, driven by fears that China's economic slowdown is worse than anticipated, has sparked speculation that the Federal Reserve will delay lifting its benchmark federal funds rate from the zero level, where it has been parked since the 2008 financial crisis to support the US economy's recovery from severe recession.

Analysts' expectations that the Fed will raise the fed funds rate at its September 16 to 17 policy meeting have dwindled, and some now think the central bank may decide to wait until 2016.

"The Federal Open Market Committee may largely retain its current policy next month as the slowdown in global growth undermines the central bank's forecast for a stronger recovery," said David Song at DailyFX.

AFP