Dollar under pressure on China equity rout concerns

The dollar recovered slightly against the yen Tuesday, although gains were limited as investors remain on edge after a sharp plunge in Chinese stock markets hit risk sentiment.

In Tokyo the greenback fetched 123.68 yen, up from 123.24 yen in New York late Monday.

The euro changed hands at $1.1062 and 136.60 yen, against $1.1091 and 136.69 yen in US trade, where it rallied thanks to a rise in German business confidence and signs of a pickup in lending in Europe.

Global markets were jolted Monday after Shanghai stocks plunged 8.48 percent -- the steepest one-day fall in eight years -- as data showing more weakness in the Chinese economy combined with fears government support measures for the mainland market will not last.

The losses continued Tuesday, with Shanghai closing down 1.68 percent, following almost three weeks of relative calm after Beijing unveiled a series of measures to end a month-long rout that saw Shanghai slump more than 30 percent.

"Yen-buying sentiment was strong as players were trying to avoid risk as the Chinese market slumped," said Minori Uchida, head of Tokyo global markets research at Bank of Tokyo-Mitsubishi UFJ.

The yen is considered a safe investment in times of uncertainty.

However, the dollar ticked up as the morning progressed and Chinese shares pared some losses.

Traders are now awaiting the Federal Reserve's two-day policy meeting that starts later Tuesday.

While the central bank is not expected to raise interest rates, dealers are hoping for some forward guidance, with most analysts tipping a rise in either September or December.

"Players remain cautious ahead of the Fed meeting -- they want to see its statement before taking positions," Uchida said.

The dollar was sitting at or near multi-year highs against some Asia-Pacific currencies.

It edged up to 13,463 Indonesian rupiah from 13,460 rupiah Monday, after it hit a 17-year-high of 13,465 rupiah last week.

The greenback hit a new six-year high of 34.93 Thai baht from 34.87 baht, while it edged up to 64.06 Indian rupees from 64.05 rupees and to Tw$31.49 from Tw$31.48.

It eased to 1,165.45 South Korean won from 1,167.00 won, to Sg$1.3672 from Sg$1.3701, and to 45.49 Philippine pesos from a fresh five-year high of 45.55 pesos.

The Australian dollar rose to 73.16 US cents from 72.86 cents, while the Chinese yuan was flat at 19.88 yen.