US dollar and yen retreat against euro as risk appetite edges up

New York: The yen fell across the board while the dollar retreated against the euroon Tuesday, as a recovery in global stock markets prompted investors to lock in recent steep gains in those two currencies.

The moves were technical, as there has been no major catalyst to change the market's perspective on risk-taking, even as ongoing unwinding of leveraged trades away from risky assets remained entrenched.

European shares rose 3.8 per cent. Those gains followed a 6.4 per cent jump in Japan's Nikkei share average from a 26-year low, boosting the euro and Australian dollar, two of the currencies most battered versus the yen.

But the respite for stock markets and the yen's fall were seen as a temporary pause from recent price action as the spectre of a prolonged global recession was expected to keep investors in risk-averse mode.

"I think this is just a technical rebound. The recovery in equity prices has hurt the yen and weighed on the dollar against the euro," said Matthew Strauss, senior currency strategist, at RBC Capital Markets in Toronto.