The dollar took a breather on Thursday after hitting its highest level against the yen since 2002, and stocks stuttered as high-flying Chinese shares tumbled and European officials downplayed the talk of an imminent deal to keep Greece afloat.

Commodity markets rebounded as the dollar’s momentum waned and though the euro clung to hopes of an agreement on Greece, the bloc’s shares and lower-rated government bonds all lost ground.

Greece debt deal

A Greek government official had sparked speculation late on Wednesday that a deal had been drawn up. But a string of immediate denials by top European officials was followed by one from IMF chief Christine Lagarde as G7 leaders met in Germany.

“We are all in the process of working towards a solution for Greece, and I would not say that we already have reached substantial results,’’ she said in a German TV interview.

“Things have moved, but there is still a lot of work to do,’’ she said, adding that she believed Greece would fulfil its commitments.

European shares

Britain’s FTSE, Germany’s DAX and France’s CAC 40 were down 0.2, 0.4 and 0.5 per cent, respectively in early trading, Greek stocks dropped 0.7 per cent, while yields on Italian, Spanish and Portuguese government bonds all rose.

But the euro was up for a second day, adding 0.3 per cent against the dollar at $1.0935 after positive signs from Spain, where the economy grew at its fastest quarterly pace in over seven years in the first quarter as consumer spending recovered.

“There is a little bit of better sentiment towards Greece after we saw some reports yesterday of a deal,’’ said Manuel Oliveri, an FX market strategist at Credit Agricole in London. “Even if there is no confirmation, it shows to the market that some progress is being made.’’

China rout

Asian trading overnight was dominated by a heavy tumble for Chinese shares which dropped almost 7 per cent. It was their biggest fall since January but follows a 50 per cent surge since March.

Regional investors cited several major brokerages tightening requirements on margin financing, which triggered fears of further regulatory steps to reduce leverage in the red-hot market.

Next week will also see more than 20 initial public stock offerings by new companies.

“The brokerages are front running what the regulator wants to do,’’ said Bernard Aw, an analyst at ING Markets in Singapore. “This is no longer an individual case, but an industry-wide campaign,’’ added Zhang Chen, an analyst at Shanghai-based hedge fund Hongyi Investment.

Hong Kong shares plunged 2.3 per cent too and Australian shares also fell with the S&P/ASX 200 index losing 0.2 per cent after weaker-than-expected business spending data.

Japan’s Nikkei bucked the downtrend as the weaker yen helped the index log its 10th consecutive rise, the longest winning streak since February 1988 to notch another 15-year closing high.

Dollar vs yen

The dollar hit its highest level against the yen since late 2002, rising as high as 124.30 yen, and was slightly higher on the day in Europe at 123.96.

But with it lower against the majority of major currencies, commodity prices rose. Oil recovered after a two-day slide, with Brent futures up 0.7 per cent to $62.50 a barrel and US crude fetching $57.70 per barrel.

Gold was also higher at $1,190 an ounce having hit a two-week low of $1,183.76 in the previous session.

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