Investing.com - The dollar pared back gains against the yen on Monday as declines in European equity markets on the back of concerns over the growth outlook underpinned demand for the traditional safe-haven yen.
USD/JPY was trading at 106.92, almost unchanged for the day and off session highs of 107.40.
European equities turned lower after Germany’s Bundesbank said the country’s economy barely grew in the third quarter, as industrial output slowed and business sentiment deteriorated.
In its monthly report the German central bank said that while the euro zone’s largest economy was unlikely to enter a recession the economic outlook for the fourth quarter was cautious.
In recent months the European Central Bank has cut euro zone interest rates to record lows, extended new four-year loans to banks and unveiled a plan to purchase asset-backed securities, a form of quantitative easing, in a bid to spur growth.
The ECB launched its new stimulus program on Monday, purchasing covered bonds in a bid to increase liquidity in the region.
Comments by various ECB officials late last week reiterated the need for governments to implement structural reforms and raise productivity in order to boost growth in the euro area.
Meanwhile, U.S. futures pointed to a lower open after quarterly results from IBM fell far short of forecasts, fuelling fears over the outlook for business spending.
The yen had weakened earlier in the session after upbeat U.S. economic reports on Friday were seen as reinforcing expectations that the Federal Reserve will raise interest rates in the second half of 2015.
Demand for the yen was also hit by mounting speculation that Japan’s pension fund is growing closer to increasing its holdings of stocks and overseas assets, which would drive up demand for foreign currencies.
Elsewhere, the euro was steady against the dollar and the yen, with EUR/USD at 1.2766 and EUR/JPY at 136.48.
The US dollar index, which tracks the performance of the greenback against a basket of six major currencies, dipped 0.11% to 85.22, holding above last week’s three-week lows of 84.53.