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Tokyo - The dollar recovered slightly against the yen on Tuesday, although gains were limited as investors remain on edge after a sharp plunge in Chinese markets hit risk sentiment, but the euro was supported by upbeat German data.
In Tokyo, the greenback fetched ¥123.55, up from ¥123.24 in New York late on Monday. although it is still off the ¥123.75 earlier in Asia.
The euro changed hands at $1.1076 and ¥136.79, against $1.1091 and ¥136.69 in US trade, where it rallied thanks to a rise in German business confidence and signs of a pickup in lending in Europe.
Global markets were jolted Monday after Shanghai stocks plunged 8.48% - the steepest fall in eight years - as data showing more weakness in the Chinese economy mixed with fears government support measures for the mainland market will not last.
The losses continued on Tuesday, with Shanghai losing 5% at one point, despite renewed government vows to boost buying, before ending the morning one percent lower.
The collapse followed almost three weeks of relative calm after Beijing unveiled a series of measures to put an end to a month-long rout that saw Shanghai slump more than 30%.
"Yen-buying sentiment was strong as players were trying to avoid risk as the Chinese market slumped," said Minori Uchida, head of Tokyo global markets research at Bank of Tokyo-Mitsubishi UFJ.
The yen is considered a safe investment in times of uncertainty.
However, the dollar ticked up as the morning progressed and Chinese shares pared losses.
Traders are awaiting the Federal Reserve's two-day policy meeting that starts later on Tuesday.
While the central bank is not expected to raise interest rates, dealers are hoping for some forward guidance, with most analysts tipping a hike in either September or December.
"Players remain cautious ahead of the Fed meeting - they want to see its statement before taking positions," Uchida said.
