Dollar gains ground in Asian trade

The dollar continued to rebound in Asian trade on Tuesday after remarks from Federal Reserve chairman Ben Bernanke added to speculation about possible US interest rate hikes, dealers said.

They said the greenback was also boosted by comments from US Treasury Secretary Henry Paulson, who did not rule out intervention in the foreign exchange market to shore up the currency.

The dollar rose to 106.62 yen in Tokyo morning trade from 106.30 in New York late on Monday.

The euro slipped to 1.5599 dollars after 1.5642 but rose to 166.35 yen against 166.30.

"The general trend now is to buy the dollar," said Hideaki Inoue, chief manager of forex trading at Mitsubishi UFJ Trust and Banking Corp.

"The US authorities are now making hawkish remarks, signalling a rate hike not too far from now to combat inflation," Inoue said.

The Federal Reserve has slashed its benchmark federal funds rate to 2.0 percent from 5.25 percent last September to bolster the sputtering US economy.

The market view is that US rates have now bottomed, Inoue said.

Bernanke said Monday that the likelihood of a severe US economic slump has diminished, while "upside risks" to inflation are forcing the Fed to be more vigilant following the latest surge in oil prices.

Paulson said the US economy is still sound, compared with other rich nations. "That's going to be reflected in the price, the value of our currency," he said.

Asked about a possible currency intervention, Paulson said: "I would never take intervention off the table or any policy tool off the table. I just can't speculate about what we will or won't do."

NAB Capital currency analyst John Kyriakopoulos said Paulson's comments "sent a clear message that officials don't want to see any further weakening in the greenback."

He said traders were on "heightened alert" for the meeting of G8 finance ministers in Japan this weekend.

US President George W. Bush said Monday that a strong dollar was in the interest of the United States.

But dealers said that worries about the health of the US economy continued to pose a risk for the dollar following Friday's news of a jump in the US unemployment rate.