Investing.com - The euro fell to session lows against the firmer dollar on Wednesday, one day after China’s central bank eased monetary policy in a bid to support its slowing economy, as investors remained on edge amid fears over a global downturn.
EUR/USD was down 0.53% to 1.1457, extending its pullback from the eight-month highs of 1.1713 set on Monday.
The dollar regained some lost ground after China’s central bank cut interest rates on Tuesday for the second time in two months, allaying fears over a China-led slowdown in the global economy.
But concerns over whether a free fall in China’s stocks will make the world’s second-largest economy weaker persisted. Shares in Shanghai opened higher on Wednesday, before ending down 1.3% in a volatile session.
Recent steep declines in Chinese equity markets have sparked fears that they will hasten an economic downturn and undermined investor confidence in the government’s ability to revitalize economic growth.
The turmoil in markets began when China unexpectedly devalued the yuan on August 11, sparking fears that the economy may be slowing at a faster than expected rate.
The single currency has strengthened in recent sessions as investors fled to the relative safe-haven currencies amid intense volatility in markets and as investors borrowed the low-yielding currency to fund investment in risk assets.
The euro received an additional boost as fears over the global economic outlook prompted investors to scale back expectations for an initial rate hike by the Federal Reserve in September.
The dollar was also higher against the yen, with USD/JPY up 0.5% to 119.5, not far from overnight highs of 119.83.
The euro was little changed against the Japanese currency, with EUR/JPY at 136.85.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose 0.47% to 94.36, off the eight-month trough of 92.52 set on Monday.