Currency traders sell the yen as China fears ease

Currency traders sold the yen Thursday as worries over China's economic slowdown eased slightly and after equity markets surged on the back of hints the US Federal Reserve will not raise interest rates next month.

In Tokyo trading, the dollar rose to 120.06 yen, up from 119.98 yen in New York, while the euro was also stronger at 136.27 from 135.72 yen. The 19-nation euro was at $1.1349, up from $1.1312 in US trade.

Fears over slowing growth in China had sent investors fleeing to the Japanese currency -- a safe haven during times of turmoil -- with the dollar tumbling to 116.18 yen earlier this week, its lowest level since February.

"The rebound in US stocks has spurred a reversal of the flight to quality we've been seeing," pushing the yen lower, Yasuhiro Kaizaki, vice president for global markets at Sumitomo Mitsui Trust Bank, told Bloomberg News.

"The trend for a gradual weakening of the yen is set to continue after a short-term correction."

Bank of Japan governor Haruhiko Kuroda said the yen's sudden rise had been "corrected", as he held out the possibility of more monetary easing measures to reach a 2.0 percent inflation target.

Further stimulus would tend to weaken the yen.

"At this stage, we have no concrete proposal for further accommodation. But if necessary, we will certainly make (an...) adjustment," Kuroda said in a speech delivered in New York.

Wild market volatility and worries over the impact of a China slowdown on global growth has thrown into doubt a widely expected Fed rate hike in September.

On Wednesday, William Dudley, the head of the New York branch of the Fed and one of the most influential members of its monetary policy board, said the case for the long-awaited rise in September had weakened. A rate rise is a plus for the greenback.

However, the outlook for the world's top economy got a lift from better-than-expected official US manufacturing report, showing orders for durable goods -- products expected to last at least three years -- jumped 2.0 percent in July.

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