Dollar weaker in Asian trade

The dollar was slightly weaker in subdued Asian trade on Tuesday as traders fretted about high oil prices and the state of the US housing market, dealers said.
They said activity was muted as players waited for fresh leads after a long holiday weekend in the United States and Britain on Monday.

The dollar slipped to 103.35 yen in Tokyo morning trade from 103.43 in European trade on Monday.

The euro firmed to 1.5790 dollars from 1.5750 and to 163.20 yen from 162.89.

"There are no fresh leads in Tokyo and participants are waiting for London trade to begin," said Hidenobu Fukuhara, a strategist at Resona Bank.

Investors kept a close watch on oil prices which last week hit a record high above 135 dollars a barrel on concerns about tight supplies and strong demand.

Recent market optimism about the possibility of a recovery in the US economy has given way to renewed concerns about the outlook, said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp.

"Market sentiment turned pessimistic as players are focusing on the damage higher oil prices are having on the world economy," he said.

The dollar has been pressured in recent days by worries that high oil and commodity prices could weigh on consumer spending in the US economy and hit corporate profits, hindering an economic recovery.

Surging crude oil prices "are likely to keep the dollar on the back foot this week since the US consumer looks most vulnerable to rising gasoline prices," NAB Capital strategist John Kyriakopoulos wrote in a note to clients.

Inflationary pressures have also reduced expectations of interest rate hikes by the US Federal Reserve over the next year "as any economic recovery proves tepid," he added.

Meanwhile, the euro has been supported by conjecture that the European Central Bank will not cut rates any time soon amid stubborn inflation. The ECB voted earlier this month to keep rates steady at 4.0 percent.

"The substantial and continuing increase in the price of oil has contributed to the deceleration in the rate of economic growth in the euro area," ECB Vice President Lucas Papademos said in an interview with a Greek newspaper.

"But, at the same time, it has intensified inflationary pressures," he added.

Investors were also waiting for a batch of economic data due this week in the US for fresh clues on the outlook for Fed interest rates.

New housing sales and a report on consumer confidence are due to be released later Tuesday while three Fed officials are expected to give speeches over the course of the week.

Meanwhile figures on eurozone consumer prices, German retail sales and Japanese inflation are all set to be released on Friday.