Yen wobbles after drop in business confidence

The dollar was slightly higher against the yen in Asian trade on Tuesday after a sharp fall in Japanese business confidence and continued efforts by Washington to talk up the greenback, dealers said.

The dollar was at 106.35 yen in Tokyo morning trade, compared with 106.13 in New York late on Monday.

The euro slipped to 1.5733 dollars from 1.5745 but edged up to 167.24 yen from 167.15.

Japanese business confidence slumped to the lowest level in almost five years in June, the central bank said in its closely watched Tankan survey, but the figure was slightly better than the market had expected.

The dollar gained support after China asked the US to try to steady the greenback amid a cooling global economy, said Saburo Matsumoto, chief forex strategist at Sumitomo Trust Bank.

Premier Wen Jiabao asked Washington to take steps to stabilise the dollar and prevent a further slowdown of the global economy in talks with visiting US Secretary of State Condoleezza Rice on Monday, Chinese state media reported.

US Treasury Secretary Henry Paulson meanwhile reiterated his support for a strong dollar, which he said was "a good thing" for the US economy.

"Every economy is going to have some ups and downs. We are going through a tough period in the US right now," he told Russian radio on Monday.

Markets were looking ahead to the release later in the day of the latest snapshot of the US manufacturing sector from the Institute for Supply Management, ahead of key US jobs data for June due on Thursday.

"We expect the US will jawbone against a much weaker dollar if a sliding stock market and weaker news on the economy continues to trigger unwinding of rate hike expectations," NAB Capital strategists wrote in a note to clients.

"For the Fed (US Federal Reserve) to change its tune on the dollar after suggesting it didn't want to see any further decline less than a month ago would be a significant blow to its credibility," they added.

Markets were waiting for a European Central Bank (ECB) meeting on Thursday when interest rates are expected to rise by 25 basis points to 4.25 percent to try to curb inflation that hit 4.0 percent in the eurozone in June.

But analysts said European officials may also start to be more attentive to slowing growth in the eurozone economies.

"The outlook for European growth remains uncertain and there are areas that are already experiencing economic slowdowns," said Sumitomo's Matsumoto.