By Joseph Adinolfi, MarketWatch , Hiroyuki Kachi

Peso ticks higher as Mexico's central bank raises interest rates

The dollar trimmed its early gains against the yen in afternoon trading on Thursday as stocks sold off sharply and investors moved back into haven assets like the Japanese currency.

Losses in the main U.S. equity benchmarks accelerated following reports that some of Deutsche Bank's derivatives-clearing clients were pulling excess cash, which weighed on shares of the bank (http://www.marketwatch.com/story/deutsche-bank-shares-tumble-after-report-says-some-clients-reduce-collateral-on-trades-2016-09-29). The S&P 500 index was down 1% at 2,1459

"When you get that, you'll get capital going out of stocks and back into the yen, that's not uncommon," said Colin Cieszynski, chief markets strategist at CMC Markets.

The greenback traded as high as Yen101.75 early in the European trading day, its strongest level since Sept. 21. But more recently, one dollar bought Yen101.09, compared with Yen100.93 late Wednesday in New York.

Investors also might be buying the yen ahead of a raft of widely watched Japanese economic data expected to be released early in the Asia trading day Friday, Cieszynski said. Some of the highlights include reports on inflation and the unemployment rate.

Remarks from Federal Reserve Gov. Jerome Powell and Atlanta Fed President Dennis Lockhart also helped weigh on the dollar after the two suggested they would support the Fed leaving interest rates on hold for now.

Their comments contrasted with those made by Kansas City Fed President Esther George late Wednesday. George, who said she was one of three Fed officials who voted to raise interest rates in September, said the Fed is in danger of falling behind if it doesn't hike rates soon.

Jane Foley, a senior currency strategist at Rabobank, said hawkish comments from Fed officials wouldn't have a lasting impact on the dollar unless U.S. economic data improve.

"Unless we have robust data, the market is going to remain skeptical of the ability of the Fed to raise interest rates progressively throughout 2017," Foley said.

Commodity currencies soften despite rising oil prices

A rally in commodity currencies stalled, even as oil prices continued to rise. Members of the Organization for the Petroleum Exporting Countries on Wednesday agreed on the need to cap oil production, though the cartel said it would wait until its November meeting to iron out the details. The news sent oil prices sharply higher.

U.S.-traded crude for November delivery was up 1.6% $47.85 a barrel in recent trade, after rising 5.3% on Wednesday (http://www.marketwatch.com/story/crude-higher-but-market-faces-long-wait-for-next-opec-move-on-output-2016-09-28).

The Canadian dollar, Russian ruble and several other commodity-linked currencies softened against the dollar in recent trade. The greenback bought C$1.3156 in recent trade, compared with C$1.3059 late Wednesday. Meanwhile, one dollar bought 63.17 Russian rubles, compared with 63.06 rubles late Wednesday.

In other currency trading, the euro was off slightly, buying $1.1205, compared with $1.1223 late Wednesday. Meanwhile, the pound traded at $1.2956, compared with $1.3044 Wednesday.

Peso ticks higher as Mexico raises interest rates

The dollar trimmed its gains against the Mexican peso after Mexico's central bank raised its overnight interest rate target half a percentage point to 4.75%, saying higher rates would help it tamp down inflation.

The dollar recently traded at 19.41 pesos, compared with 19.36 pesos late Thursday.

(END) Dow Jones Newswires

September 29, 2016 14:21 ET (18:21 GMT)