The dollar bounced back its against major peers on Wednesday, extending its previous days' gains as forex investors shunned riskier assets in favour of safe haven currencies over growing concerns regarding slowing global growth and the U.S.-Sino trade dispute.
With sentiment souring and a global equities rout on Tuesday, risk averse traders fled to safety of the liquid dollar, which climbed from a two-week low hit earlier on Tuesday.
The greenback had been hurt for most of the week as cautious comments by Federal Reserve officials and surprisingly weak U.S. economic data suggested the central bank could slow the pace of monetary policy tightening.
The dollar index, measuring performance against six major rivals, was steady at 96.82 on Wednesday. The index gained 0.65 percent in the previous trading session.
The Federal Reserve is widely expected to lift interest rates by another 25 basis points in December, market participants think the greenback could trade with a positive bias in the short term, despite lowering their longer-term rate hike expectations.
USD/JPY traded at 112.91, up 0.14 percent. The yen hit its highest level this month on Tuesday as the pair fell to 112.29 before losing steam as dollar bulls took charge.
Despite its safe haven status, the yen's strength has been muted. Forex analysts suspect this is due to Japanese investors keeping their money in U.S. and foreign markets, rather than bring it home.
EUR/USD traded with a weak bias at 1.1372. The single currency lost 0.7 percent of its value on Tuesday.
