Yen rises against dollar and euro at start of trading

The dollar held near multi-week lows in early trade on Wednesday, weighed down by weak Chinese demand, while the yen rose ahead of a central bank meeting.

Markets are particularly watching PMI data from Europe, due later today, to see if the indicators support bets on two European interest rate cuts by the end of January.

The euro was steady at $1.0848 in early trade, while sterling was steady at $1.2901, which could rise if UK PMIs surprise to the upside and dampen bets on interest rate cuts.

Markets are now pricing in a 44% chance of a 10 basis point interest rate hike in Japan next week, dampening speculation after traders suffered losses as a result of suspected currency intervention by Japanese authorities.

The dollar fell nearly 1% against the yen to 155.55 during trading yesterday, and was trading near 155.78 in early trading today.

The euro also fell 1.3% against the yen yesterday, hitting a five-week low of 168.79 yen in early trading.

Lower oil, iron ore and copper prices, coupled with a wave of risk aversion in stocks, have pushed currencies such as the Australian, New Zealand and Canadian dollars lower against the US dollar.

The Australian dollar touched a five-week low below $0.6612 in early trading on Wednesday.

The New Zealand dollar is hovering around a two-and-a-half-month low of $0.5951 hit on Tuesday.

Chinese growth figures came in below expectations last week and surprise interest rate cuts on Monday drew attention to a dim outlook for demand for raw materials, sending commodities such as iron ore and copper to three-month lows on Wednesday.

The Canadian dollar hit a six-week low of C$1.3787 per dollar ahead of a central bank meeting later on Wednesday, with markets pricing in an 84% chance of a 25 basis point rate cut.

The US dollar index was steady at 104.5 in the latest trading, while the Chinese yuan was steady at 7.2909 in offshore trading.

Futures traders are awaiting U.S. GDP and core PCE data due later in the week to test expectations for two U.S. interest rate cuts over the rest of the year.