Yen supported in Asia by financial sector jitters

The yen was well supported in Asian trade on Tuesday as fresh worries about the health of the US financial sector made investors more risk averse, dealers said.

The dollar was at 104.50 yen in Tokyo morning trade, against 104.52 in New York late Monday, when the greenback had fallen against the Japanese currency.

The euro slipped to 1.5530 dollars from 1.5540 and to 162.29 yen from 162.41.

The yen was propped up as investors tend to buy back the Japanese currency to unwind risky positions in times of uncertainty, dealers said.

"The dollar overall remains weak following losses on Wall Street and market players shunned risk as worries over the credit crisis resurfaced," said Kenichi Yumoto, vice president of forex trading at Societe Generale.

"Fears over the financial sector have become the hot topic again after being put on the backburner in recent weeks," he added.

The strength of the yen also sent the euro lower against other major currencies, he said.

US shares skidded lower Monday after management shakeups at US banking giants Wachovia and Washington Mutual.

The ratings agency Standard & Poor's meanwhile warned that banks could face further losses on US residential mortgage-backed investments.

Traders are now looking ahead to upcoming US economic data, including a key monthly jobs report due on Friday.

Interest rate decisions are also due on Thursday from the eurozone and British central banks although both are expected to leave monetary policy unchanged for now due to worries about inflation.

"Investors don't know which to focus more on -- the renewed worries over the financial system or the interest rate outlook," said Yumoto.

On Monday the US Institute of Supply Management reported that its index of manufacturing conditions edged up to 49.6 in May from 48.6 in April, beating analysts' forecasts for a lower reading of 48.5.