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(Bloomberg) — The dollar remained on the back foot, sliding versus Korea’s won as investors cut bets on higher U.S. interest rates after China’s shock devaluation. The yuan rose in offshore trading, while Japanese stocks extended losses.
The greenback traded near its weakest level this month versus Japan’s currency, sinking 1.3 percent against the won by 9:33 a.m. in Tokyo after two days of gains. The yuan climbed 0.9 percent in Hong Kong. Japan’s Topix index fell a third day, losing 0.4 percent as Australian stocks rebounded. Standard & Poor’s 500 Index futures were little changed after the gauge erased declines in New York. Crops rallied after their rout.

Traders have been reducing wagers on a September rate rise in the U.S. since China unexpectedly loosened its management of the yuan, igniting speculation the devaluation will sap inflation globally. Bloomberg’s Dollar Spot Index slid the most in two months Wednesday, fueling a bounce back for some commodities. The Philippines and Korea review rates Thursday amid concern China will spark a regional currency war.

“Right now it’s simply a matter of investors holding back as they can’t see where things are going,” Mitsushige Akino, executive officer at Ichiyoshi Asset Management Co. in Tokyo said by phone. “The yuan devaluation happened because the Chinese economy is weak, and it points to real weakness. If we see any further devaluation, it’ll be negative for companies that compete with China, especially in the emerging economies.”

To contact the reporters on this story: Emma O’Brien in Wellington at eobrien6@bloomberg.net; Yuko Takeo in Tokyo at ytakeo2@bloomberg.net To contact the editors responsible for this story: Emma O’Brien at eobrien6@bloomberg.net John McCluskey