The dollar slumped the most in one month as upheaval in China’s stock and currency markets weighed on the outlook for higher interest rates in the U.S.

The greenback reached its lowest level in almost a year versus the yen after a 7 percent rout in China’s equity markets curtailed trading for the second time in four days. China’s foreign-exchange reserves slid more than forecast in December, capping their first-ever annual decline, prompting speculation that authorities are selling dollars to prop up the currency. Shorter-term U.S. debt yields declined and futures contracts show a 43 percent probability of a U.S. interest-rate rise by April, down from 56 percent on Dec. 31.

The Bloomberg Dollar Spot Index, which tracks the currency versus 10 peers, fell 0.4 percent to 1,237.09 as of 4:52 p.m. in New York, its first loss in nine days.

The yen rose 0.7 percent to 117.63 per dollar, touching the strongest on a closing basis since Feb. 5. Chinese stocks fell 8.5 percent in Shanghai that day, fueling volatility and risk aversion that spread around the world.

Source : Bloomberg