NEW YORK The dollar slipped on Wednesday from one-month highs against a basket of currencies as minutes of the Federal Reserve's policy meeting in December suggested further U.S. rate increases would be gradual because of concerns about persistently low inflation.
Worries about the Chinese economy sent the yuan to its lowest level since the 2010 opening of its offshore market and intensified losses across global stock markets.
Anxious traders piled into the low-risk Japanese yen, which hovered near a three-month high versus the greenback and a nine-month peak against the euro.
"They put a lot of caveats in their liftoff. It's a theme that may haunt the dollar," David Rodriguez, quantitative strategist at FXCM in New York, said of the Fed decision.
Fed policymakers at the Dec. 15-16 meeting decided to raised interest rates for the first time in nearly a decade, although some worried inflation could get stuck at dangerously low levels, according to the minutes.
Despite market turbulence since the start of 2016 and data that signalled a cooling in U.S. business activities, a top Federal Reserve official said on Wednesday the central bank remains on track for four more rate increases in 2016.
"My view is that those numbers are in the ballpark," Fed Vice Chairman Stanley Fischer told CNBC television.
The dollar index, which measures the greenback against a group of six currencies, .DXY was down 0.2 percent in late trading at 99.160, a shade below the one-month peak set on Tuesday.
Sharp stock market losses in the first three trading days of 2016 triggered by worries about the world's second-biggest economy unleashed a safe-haven scramble for the yen.
"Everyone has been taken by surprise by the scale of the volatility this week. It's all driven by China," said Gian Marco Salcioli, head of FX sales at Italy's Intesa Sanpaolo Banca IMI in Milan.
In addition, claims by North Korea that it successfully tested a powerful nuclear bomb propelled the yen higher against the euro and the dollar.
The greenback fell 0.5 percent to 118.49 yen JPY=, while the euro slipped 0.1 percent to 127.79 yen EURJPY=.
Investors were spooked by the rapid weakening of the Chinese currency, which fell almost 2.5 percent in just three days. That almost matched August's one-off devaluation, which touched off a global stock market selloff.
After the People's Bank of China again fixed its onshore rates for the yuan lower CNYFIX=SAEC, the less-regulated offshore rates for the currency fell more than 1 percent against the dollar to a record low of 6.7315 in London trade CNH=D3.
(Additional reporting by Patrick Graham in London and Hideyuki Sano in Tokyo; Editing by Hugh Lawson, Meredith Mazzilli and Leslie Adler)
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