By Lisa Twaronite, MarketWatch
TOKYO (MarketWatch) -- The dollar gave up early gains against the yen but held onto some strength against other major rivals in Asian trading Tuesday, after a report that an official at a Chinese sovereign wealth fund said the U.S. unit had probably hit bottom.
The dollar index (DXY 77.14, +0.13, +0.17%) , which measures the greenback against a trade-weighted basket of six major currencies, stood at 77.081, up from 76.991 in late North American trading on Monday.
China Investment Corp. executive Peng Junming reportedly said that the U.S. dollar was likely to appreciate from current levels, and that China and the U.S. were on track to raise interest rates in the second half of the year. Read more on China wealth fund official's dollar remarks.
"I think the dollar is at its bottom now. There will be very limited space for the dollar to drop further," a Reuters report quoted him as saying. "The yen is what, I think, has the worst outlook. The yen will continue to drop, unlike the dollar, which will not serve for long as a source of funding carry trades."
Carry trades involve borrowing funds in lower-yielding currencies, such as the dollar, and investing them in higher-yielding assets.
Peng's comments lifted the greenback, but "had only a short-lived impact on the market," said Sue Trinh, senior currency strategist at RBC Capital Markets, in emailed comments.
The dollar fetched 91.90 yen, down from 92.09 yen late Monday.
Japanese economic data painted a mixed picture for currency investors Tuesday, as the current-account surplus grew more than expected in November, boding well for an export-led recovery, but bank lending marked its first year-on-year drop in nearly four years, suggesting deflation could be sapping demand for funds. See Economic Report on Japan data.
The euro traded at $1.4493, down from $1.4526 Monday.
On Monday, the dollar fell against the euro to its lowest in three weeks after a strong jump in Chinese trade supported expectations that the global economy could recover sooner or faster than the U.S. economy.
