Dollar struggles, yuan sinks to 4-year low offshore

NEW YORK, Dec 30 The U.S. dollar rallied against commodity currencies such as the Norwegian crown and Russian ruble on Wednesday after declining oil prices weighed on the currencies of oil-dependent economies, while short-covering kept the euro afloat.

The dollar index, which measures the greenback against six major currencies, was last down 0.07 percent at 97.917.DXY. But on Wednesday, U.S. crude handed back some of the previous day's 3 percent gain and dipped back towards a 7-year low, hurt by lingering supply glut concerns and forecasts that the cold snap would be short-lived.

The euro rose about 0.4 percent against the yen to 132.19 EURJPY= and also added about 0.1 percent against the dollar, changing hands at $1.0977 EUR= .

BNP Paribas (Xetra: 887771 - news) strategist Michael Sneyd said the dollar had lagged significantly behind moves up in US bond yields since the Federal Reserve delivered its first rise in official USA interest rates on December 16. A weak five-year auction and bounce in oil prices pushed U.S. Treasury yields higher on Tuesday, favouring the greenback.

But crude oil instability, made worse by prospects of a warm global winter, was seen clouding the dollar's near-term outlook. Japanese markets were open on the Christmas holiday, when the US and London markets were closed.

Against the yen, the dollar was last up just over 0.1 percent at 120.62 yen JPY= , off a session low of 120.17 yen as well as its Friday low of 120.05 yen.

Since the Fed's move, the Canadian dollar has fallen to an 11-year low of C$1.4001 per US dollar, as crude oil, until this year the country's largest export, resumed its descent and early data on economic growth in the last three months of 2015 came in weaker than expected.

The dollar inched away from a two-month low against the yen on Monday, while a resumption in falls in oil prices took linked currencies including the Australian and Canadian dollars around a third of a percent lower.

The Australian dollar was steady at $0.7292 (AUD=D4) after rising to $0.7303 overnight, its highest since December 10. The dollar was last up 0.06 percent against the yen at 120.540 yen. After another fall on Monday, China's yuan held steady at 6.483 per dollar.

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