Investing.com -The dollar was lower against the yen on Wednesday, nursing losses following a steep selloff in the previous session sparked by fears over risk from political instability in Greece and new restrictions on China’s debt markets.
USD/JPY was down 0.62% to 118.97, but was holding above Tuesday’s lows of 117.92. The pair rose to seven year peaks of 121.83 on Monday.
The dollar tumbled and global equity markets sold off following a surprise decision by the Greek government to bring forward a parliamentary vote for president to next week, a move which could trigger early elections if Prime Minister Antonis Samaras’ candidate is not chosen.
Markets were also spooked by a Chinese government decision to set new restrictions on collateral for short-term loans. The decision fuelled fears that China’s economy is slowing at a faster rate than anticipated.
Demand for the dollar looked likely to remain supported by the diverging monetary policy stance between the Federal Reserve and central banks in Japan and Europe.
Last week’s strong U.S. jobs report for November prompted investors to bring forward expectations for the first hike in interest rates to mid-2015 from September 2015 ahead of the report.
Investors were looking ahead to next week’s policy statement from the Fed amid speculation that policymakers could drop an assurance that interest rates will stay low for a "considerable time".
The dollar was also lower against the euro, with EUR/USD up 0.14% to 1.2390, reversing the single currency’s drop to a two year trough of 1.2246 in the wake of Friday’s jobs report.
The U.S. dollar index, which measures the greenback against a basket of six major currencies, was down 0.18% to 88.56, not far from Tuesday’s lows of 88.16. On Monday the index rose to a five year high of 89.53.