Investing.com - The dollar regained ground against the euro and the yen on Wednesday but gains were held in check as ongoing concerns over the global economic outlook continued to weigh on market sentiment.
USD/JPY was last up 0.64% to 120.11 after rising to highs of 120.46 earlier.
The dollar moved higher after the Nikkei rose in early trade, dampening demand for the Japanese currency.
But the Nikkei ended slightly lower and Chinese shares were also lower after a volatile session after Tuesday’s run of disappointing manufacturing data added to fears over the global economic outlook.
Economic reports showed that China’s factory sector contracted at the fastest rate in three years, while manufacturing activity in Europe and the U.S. was also weaker than expected.
The dollar was also higher against the euro, with EUR/USD down 0.57% to 1.1257.
The worsening outlook for equities has underpinned demand for the low yielding euro and yen in recent sessions.
Investors often use low-yielding currencies to fund positions in higher-yielding currencies and equities, known as carry trading.
The dollar has also come under pressure amid ongoing uncertainty over whether the recent turmoil in global financial markets will prompt the Federal Reserve to delay hiking short-term interest rates.
Investors were looking ahead to Friday’s U.S. jobs report for August, which could help to provide clarity on the likelihood of a near-term interest rate hike.
The U.S. was to release a report on private sector jobs growth later Wednesday.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.36% to 95.73, holding above the eight-month trough of 92.52 set last Monday.