LONDON, Jan 11 (Reuters): The dollar recouped some of its recent losses on Thursday after China's regulator dismissed a report that the country could halt its buying of US treasuries, boosting the greenback following its biggest one-day fall in a month.
The dollar has been struggling to gain traction in the opening days of 2018 after losing around 10 per cent against a basket of currencies last year as economic growth elsewhere, notably Europe, overtook the US.
And while the US Federal Reserve has been slowly tightening policy over the last two years, traders have been repricing market expectations of when Europe and Japan will follow suit.
Bloomberg News had reported on Wednesday that Chinese officials reviewing the country's foreign exchange holdings had recommended slowing or halting purchases of US Treasury bonds, pushing 10-year yields higher and the dollar lower.
China's foreign exchange regulator said the report could be based on erroneous information, adding that the country was diversifying its forex to safeguard their value.
The dollar then rallied and was up 0.4 per cent against the yen, although the US currency is still down more than 1.0 per cent against the yen this week after markets bet the Bank of Japan (BoJ) could start to tighten monetary policy faster than expected.
Against a basket of currencies the dollar was up 0.2 per cent on Thursday, off the previous day's near three-month lows. Many analysts remain bearish.
"We go into the year on the proviso that the while the dollar may have become a little oversold and due a moderate correction, we favour the dollar structural depreciation to extend," Jeremy Stretch, currency strategist at London-based CIBC Capital Markets, told the Reuters Global Markets Forum.
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