Dollar nudges higher against yen in Asia

The dollar rose slightly against the yen in Asian trade Wednesday, propped up by a drop in oil prices and renewed speculation about possible US interest rate rises, dealers said.

The US currency gained to 107.33 yen in Tokyo afternoon trade from 107.25 in New York late Tuesday.

The euro edged up to 1.5788 dollars after 1.5781 and to 169.44 yen from 169.27.

"A fall in oil prices is the main reason for the stronger dollar, along with hawkish comments by the Philadelphia Fed," said Kanako Oikawa, a currency strategist at Traders Securities.

Philadelphia Federal Reserve president Charles Plosser warned in a speech that a hike in US interest rates was unavoidable in the short-term in the face of inflation pressures.

While Plosser is seen as one of the most hawkish members of the Fed's rate-setting committee, his remarks rekindled speculation about possible US rate hikes that could boost the dollar, dealers said.

Investors generally prefer currencies offering higher yields.

US stocks staged a late rally Tuesday on easing worries about high energy costs and renewed interest in the battered financial sector.

The dollar also found support from US Treasury Secretary Henry Paulson, who reiterated Washington's preference for a strong currency and renewed his backing for troubled US mortgage finance giants Fannie Mae and Freddie Mac.

Markets were watching to see whether the euro will strike fresh record highs above 170 yen.

"The recent trend of the euro's steady rise against the yen is not likely to change anytime soon," Mitsuru Sahara, a senior dealer at Bank of Tokyo-Mitsubishi UFJ, told Dow Jones Newswires.

"The euro may rise to 175 yen over the next few weeks."

Against Asian currencies, the dollar fell to 1,013.70 South Korean won from 1,017.1 on Tuesday, to 9,147.50 Indonesian rupiah from 9,165.00, to 44.05 Philippine pesos from 44.65 and to 33.35 Thai baht from 33.36.

But it rose to 1.3594 Singapore dollars from 1.3524 and to 30.375 Taiwan dollars from 30.37.

Dollar little changed in Asia

The dollar was steady in Asian trade on Tuesday as worries about resurgent oil prices offset relief that major US banks' earnings were not as bad as feared, dealers said.

The US currency was little changed at 106.37 yen in Tokyo morning trade compared with 106.41 in New York late Monday.

The euro rose slightly to 1.5932 dollars from 1.5921 and to 169.46 yen from 169.42.

"I don't think the dollar will move much this week against the Japanese currency," said Masatsugu Miyata, forex dealer at Hachijuni Bank. "We don't see many factors to support the yen."

Traders returning to work in Tokyo after a long weekend opted to wait for fresh leads after a rebound in oil prices counter-balanced easing concern about problems in the US financial sector, dealers said.

"The direction of the dollar against the yen remains unclear," said Saburo Matsumoto, chief forex strategist at Sumitomo Trust Bank.

Dealers were monitoring trading in the euro against the yen.

"We're interested in watching when the yen will hit a new low" beyond 170 per euro, said Matsumoto.

The euro continued to be supported by the higher level of interest rates in the eurozone compared with those in the US and Japan because investors generally prefer currencies offering better yields, dealers said.

Overnight the greenback got a boost after Bank of America posted a quarterly profit well above expectations, further soothing jitters about US financial woes after last week's smaller-than-expected loss at Citigroup.

But gains in the dollar were short-lived as oil prices, which plunged more than 16 dollars a barrel in New York last week, surged higher as a tropical storm barrelled through the Gulf of Mexico, threatening oil installations.

Dollar eases in Asian trade as financial worries linger

The dollar reversed gains against the euro and yen in Asian trade Thursday as markets remained on edge for surprises in US banking earnings despite a rally on Wall Street, dealers said.

The dollar eased to 105.01 yen in Tokyo morning trade from 105.12 in New York late on Wednesday.

The euro firmed to 1.5839 dollars from 1.5821 but was flat at 166.31 yen.

"The dollar's overnight rally was limited as markets are cautious ahead of more banking results and have priced in that they will be negative," said Hideaki Inoue, chief forex manager at Mitsubishi UFJ Trust and Banking Corp.

Major US investment banks JPMorgan and Merrill Lynch are set to reveal their balance sheets later Thursday. Citigroup, which has been hit hard by the subprime loan crisis, reports earnings on Friday.

The greenback had firmed against other major currencies on Wednesday on falling oil prices and a surge in US shares triggered by a better-than-expected second quarter earnings reports by Wells Fargo and chip-maker Intel.

The US unit was also supported by speculation that the Federal Reserve may be forced to raise interest rates after a jump in consumer inflation.

"Inflation is currently too high," Fed chairman Ben Bernanke said in a second day of testimony to Congress, speaking after consumer prices rose 1.1 percent in June from May for an annual pace of 5.0 percent.

The monthly jump in the consumer price index was the sharpest since June 1982, while a 0.3 percent rise in core CPI excluding energy and food was the strongest since January.

Meanwhile the euro continued its downward trend against the dollar, falling from its all-time high reached earlier this week on mounting worries over a cooling European economy, dealers said.

"Currently, the overall European economy is doing better than the US economy, but there is no doubt that Europe will worsen. It's only a matter of time that markets will shift their focus to that," Inoue said.

Dollar edges up in Asian trade

The dollar edged up in Asian trade on Thursday amid caution after a Wall Street slump and ahead of the Bank of England's interest rate decision, dealers said.

The dollar rose to 106.76 yen in Tokyo from 106.72 in New York late Wednesday.

The euro slipped to 1.5726 dollars from 1.5754 and to 167.89 yen from 168.04. The British pound slipped to 1.9814 dollars from 1.9826.

"Currencies are directionless while markets are paying close attention to stock markets," said Saburo Matsumoto, chief forex strategist at Sumitomo Trust Bank.

The yen was higher in earlier trade following an overnight plunge on Wall Street, but the Japanese currency stabilised by noon trade as Japanese shares edged back up, he added.

The blue-chip Dow Jones Industrial Average slumped a hefty 236.77 points (2.08 percent) to close at 11,147.44, entering into "bear market" territory as investors fretted over the health of corporate America.

An unnamed trader in a major Tokyo bank told Dow Jones Newswires that "market conditions are a little unstable and players are reluctant to push the dollar much higher."

But "looking at yesterday's moves, the dollar could have fallen further given all the negative news and the stock market's fall, but it didn't. So it seems players are not that nervous at the moment," he added.

An interest rate decision is due later Thursday by the Bank of England (BoE). British borrowing costs are expected to stay unchanged at 5.0 percent amid economic turmoil, dealers said.

"The BoE faces a tough task in balancing the evident sharp slowing in activity against a background of high and rising headline consumer price inflation," wrote NAB Capital strategist John Kyriakopoulos in a note.

"We expect them to leave interest rates on hold in July, as they seek to ensure that higher short-term inflation does not get embedded into longer-term underlying inflationary pressures," he added.

Dollar firms ahead of G8 talks, Bernanke speech

The dollar firmed in Asian trade on Monday as the market waited to see if leaders of the world's industrialised nations sent a message to support the sliding greenback at the G8 summit, analysts said.

Market players were also treading cautiously ahead of speeches later this week by US monetary officials, they said.

The dollar was changing hands at 107.04 yen in Tokyo in late morning trade, up from 106.63 in Europe late Friday.

The euro bought 1.5642 dollars, down from 1.57 dollars, while holding steady at 167.41 yen. The US markets were closed on Friday for the Independence Day holiday.

Leaders of the Group of Eight (G8) richest nations are starting talks Monday in the northern Japanese town of Toyako.

US President George W. Bush on Sunday reaffirmed the United States' "strong dollar" policy, saying the US economy's fundamental strength would ultimately support the flagging currency.

"The US believes in a strong dollar policy and believes that the strength of our economy will be reflected in the dollar," he said on the eve of the summit.

Osamu Takashima, chief currency analyst at Bank of Tokyo-Mitsubishi UFJ, said even though Bush was only reflecting the official US position, "it bears importance that he repeated the policy on a summit occasion".

"We believe nothing surprising will come out from the summit.

"We know it would be historical, but it is unlikely that the leaders would say (in a summit statement) they are united to prevent a weak dollar. Nonetheless we have to be careful," Takashima said.

There also is caution in the market as senior monetary officials are to speak later this week, including congressional testimony by Federal Reserve chairman Ben Bernanke on Thursday, he said.

Dollar flat against euro in Asia

The dollar was steady against the euro in Asian trade on Monday as traders weighed prospects for higher interest rates in the eurozone ahead of a key European Central Bank policy meeting, dealers said.

They said that while markets expect the ECB to raise rates on Thursday to try to contain inflation, there are doubts about whether it will be the start of a series of rate rises given concerns about slowing economic growth.

The dollar regained some of last week's losses against the Japanese currency, firming to 106.40 yen in Tokyo morning trade from 106.11 in New York late Friday.

The euro was unchanged at 1.5790 dollars but edged up to 168.05 yen from 167.22.

Traders have already priced in a 25-basis-point interest rate hike by the European Central Bank on Thursday to 4.25 in response to simmering inflation.

Markets will be looking for clues from ECB chief Jean-Claude Trichet on the future direction of rates in the 15-member eurozone, with the rate rise expected to be a one-off for now as the economy loses steam, dealers said.

"The dollar's weakness was limited by receding expectations of a series of rate hikes in Europe amid uncertainty over the economic outlook," said Yuya Koike, forex strategist at Hachijuni Bank.

The interest rate gap between the eurozone and the United States -- where the Federal Reserve's key rate is at 2.0 percent -- has weighed on the dollar, which has also been weakened by lacklustre US economic growth.`

The dollar was pressured by Friday's sell-off on Wall Street amid fresh jitters over the economic outlook, as oil prices shot above 142 dollars a barrel.

The market is also skittish ahead of Friday's monthly labour market report for June in the United States, particularly after a much bigger-than-expected jump in the unemployment rate in May to 5.5 percent.

But the US currency's fall has been curbed by speculation that Washington may take steps to try to bolster the greenback, either by trying to talk up the currency or perhaps even with market intervention, dealers said.

"There are expectations that (US officials) may need to do something to support the dollar as the economic outlook is worrying," said Koike.

He said US authorities were expected to reiterate support for a stronger dollar, while intervention to buy the US currency -- while possible -- would require cooperation from European nations to be effective.

Dollar falls as ECB rate hike expectations mount

The dollar weathered fresh losses Friday, despite a stronger-than-expected snapshot on consumer spending, amid expectations that euro zone interest rates will be hiked next week.

The gap in US and euro zone rates, US rates are considerably lower, has already weighed on the dollar, which has also been weakened by lackluster economic growth in the United States.
Traders generally prefer to hold currencies in countries where rates are higher so they can reap higher yields on their investments.

The euro was changing hands at 1.5790 dollars around 2100 GMT, up from 1.5756 late Thursday.

The dollar also fell against the Japanese yen, to 106.11 from 106.73 Thursday.

The US currency came under renewed pressure this week after the Federal Reserve brought its rate-cutting campaign to a halt Wednesday as it opted to keep its key base rate pegged at 2.0 percent in the face of mounting inflation pressures.

The dollar lost ground Friday despite a government report showing that consumer spending rose 0.8 percent in May, as Americans spent the proceeds of one-off tax rebate checks.

The financial markets follow the monthly snapshot closely because consumer spending is the main driver of US economic activity, which has been sapped, by a lengthy housing downturn and a related credit squeeze.

Dollar eases in Asian trade

The dollar eased in Asian trade on Wednesday as the markets waited for the close of a US Federal Reserve meeting for clues on the outlook for interest rates, dealers said.

The dollar eased to 107.73 yen in Tokyo morning trade from 107.83 in New York late Tuesday.

The euro edged up to 1.5570 dollars from 1.5565 but slipped to 167.71 yen from 167.83.

Markets were on tenterhooks for clues on the direction of US interest rates as the Federal Open Market Committee (FOMC) was to wrap up its two-day meeting later in the day and issue a statement.

Market watchers expect the US central bank to keep its rates on hold at 2.0 percent after gloomy data on the world's largest economy, but the focus was on what the Fed will do in the future.

The Conference Board, a business research firm, on Tuesday said US consumer confidence plunged to its lowest in June amid growing concerns about jobs, the economy and higher fuel prices.

At the same time, home prices in some US cities tumbled at a record rate as the woes of the property market showed few signs of abating.

"Everyone expects the Fed will keep rates steady... so the key for the dollar is whether the central bank's statement raises or lowers the likelihood of interest rate hikes in coming months," NAB Capital said in a note to clients.

"Traders price an 87 percent chance that the Fed hikes rates by 25 basis points on September 16," the next Fed meeting after one in August, it said.

The statement released after the meeting is expected to focus in part on inflation, which has been a growing concern for Fed chairman Ben Bernanke as well as the European Central Bank.

Dealers will watch to see the balance between concerns over inflation -- which could signal a desire to raise rates -- and the housing woes, which have led to a credit crunch.

But some analysts questioned the effects of a tighter monetary policy as there are still fears that the US economy could slip into recession.

"The Fed slashed rates nine times but the effects were not visible," said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corporation. "Bernanke's Fed has undone all its efforts to shore up economic conditions through a loose monetary policy by shifting full-scale to a hawkish tone to beat inflation," he said.

Dollar mixed in Asia ahead of Fed meet

The dollar was mixed in sluggish Asian trade on Tuesday with market
participants waiting for a US Federal Reserve meeting for clues on the
direction of interest rates, dealers said.

The dollar was at 108.00 yen in Tokyo morning trade, slightly up from 107.87 in New York late on Monday.

The euro edged up to 1.5519 dollars from 1.5513 and to 167.58 yen after 167.36.

The
Federal Open Market Committee (FOMC) opens its two-day meeting later
Tuesday, with dealers widely expecting it to leave US interest rates
unchanged at 2.0 percent.

"It will be difficult to take
positions all day long today ahead of FOMC," said Shigeru Nakane,
senior client manager at Resona Bank.

"Our consensus is no
change in rates. But all of the players are now paying attention to the
policy statement, trying to gauge how seriously the Fed will hint at a
future rate hike," Nakane said.

The Fed has slashed its key rate
by 3.25 percentage points since the subprime, or high-risk, mortgage
crisis erupted in mid-2007.

While market players have scaled
back their expectations of a series of US rate hikes this year, they
still see a chance of one or two quarter-point rate rises by the end of
2008 to keep a lid on inflation, dealers said.

The euro
rebounded moderately in Tokyo after sliding overnight on weak economic
indicators, including Germany's key business climate index, which
dropped to an 18-month low in June due to high oil prices.

Dollar dips as rate hike speculation

The dollar drifted lower in Asian trade on Thursday, pressured by a rise in oil prices and fading expectations of US interest rate rises this year, dealers said.

The dollar slipped to 107.72 yen in Tokyo morning trade from 107.86 in New York late Wednesday.

The euro edged up to 1.5554 dollars from 1.5532 but was flat at 167.54 yen.

The greenback fell after another surge in oil prices. A White House spokesman downplayed expectations of an immediate impact on crude costs from a meeting of producer and consumer countries in Saudi Arabia on Sunday.

Traders buy commodities such as oil, which is priced in dollars, as a hedge when the currency weakens.

The greenback was also weighed down by losses on Wall Street, where investors were concerned about financial problems at a big regional banking group and the jump in crude prices.

The gloomy news caused investors to reassess their expectations of higher borrowing rates in the United States, despite inflation worries.

"Traders continued to scale back expectations for Fed interest rate hikes this year," noted NAB Capital strategist John Kyriakopoulos.

"The implied probability of an August 5 Fed rate hike has fallen to around 40 percent from above 70 a week ago," he added.

At the same time, traders expect the European Central Bank to raise its benchmark lending rate next month.

Inflation in the eurozone, which hit an annualised 3.7 percent in May, is at an "unacceptable" level, ECB chief economist Juergen Stark said.

But other ECB officials have dampened expectations the central bank might be preparing for a series of rate increases.

"We see the July rate hike by the ECB as a one-off and so unlikely to be a source of strength for the euro," predicted Kyriakopoulos.

Traders were waiting for earnings results from regional US banks amid fears of subprime-related writedowns.

Dollar dips against euro in Asian trade

The dollar slipped against the euro in Asian trade on Wednesday amid doubts about the chances of a series of US interest rate rises this year to quell inflation, dealers said.
The euro firmed to 1.5519 dollars in Tokyo morning trade from 1.5508 in New York late on Tuesday.

The dollar was flat at 107.93 yen. The euro gained to 167.43 yen from 167.39.

Despite a sharp rise in US wholesale prices, traders were unsure whether the US central bank will embark on a series of rate hikes given sluggish growth in the world's largest economy.

Markets are now reassessing their view after being too quick to bet on US rate hikes, said Hideaki Inoue, chief forex manager at Mitsubishi UFJ Trust and Banking Corporation.

"They were expecting the Fed to raise rates two or three times this year. But due to continuing slow economic conditions, the Fed will find it difficult to boldly raise rates," he said.

US wholesale prices leapt a surprisingly strong 1.4 percent in May, the strongest surge in six months, but a closely watched "core" inflation rate stripping out energy and food remained tame, government data showed Tuesday.

US housing starts fell 3.3 percent in May as industrial production declined a larger-than-expected 0.2 percent compared with April, suggesting the economy is still being pressured by the fallout from the mortgage default crisis.

The dollar's fall was capped by remarks from central bank officials downplaying expectations for higher borrowing rates in the eurozone and Britain as economic conditions sour, dealers said.

British inflation hit a 16-year high of 3.3 percent in May, driven by soaring food and energy costs prices, figures showed Tuesday.

But Bank of England governor Mervyn King in a letter to finance minister Alistair Darling suggested that the breach of the 3.0 percent inflation target would not be trigger the central bank to raise rates aggressively.

British interest rates will be left on hold until early 2009 but the Bank of England "may have to cut rates more deeply than the market is currently pricing to revive the UK economy," Barclays Capital analysts wrote in a note to clients.

Meanwhile European Central Bank board member Lorenzo Bini Smaghi indicated that a 25-basis point rate hike could be enough to bring inflation down to the bank's inflation target of 2.0 percent in the eurozone, dealers noted.

Traders are waiting for quarterly results from US investment bank Morgan Stanley due Wednesday, after better than expected earnings at Goldman Sachs.

Paulson says strong dollar in US interests

US Treasury Secretary Henry Paulson said on Saturday a strong dollar was in his nation's interests and solid US economic fundamentals would support the currency in the long term.

"With regard to the dollar, my view has not changed: a strong dollar is in our nation's interest," he told a press conference after a meeting of Group of Eight finance ministers here.

Traders say that Washington appears to have been ratcheting up the rhetoric recently to talk up the US currency so as to keep a lid on inflation and limit the need for higher interest rate hikes that could stifle economic growth.

"Our economy is going through a tough period right now but that we've got strong long-term fundamentals. I believe that those fundamentals will be reflected in the currency," Paulson said.

He said the G8 had discussed foreign exchange rates during their talks but did not give details. With central bank chiefs absent from the meeting, currencies were not mentioned in the G8's final joint statement.

There has been speculation among currency traders that the G8 may consider a foray onto the market to prop up the dollar if it comes under renewed selling pressure, but Paulson sidestepped a question about possible intervention.

He said the US economy still faced challenges.

"With regard to housing, this is still the biggest risk to the downside in our economy. We're making progress working through the correction but I believe it's very likely that this will spill over into next year," he said.

US capital markets were "still under stress and as I said before we're making progress but there are going to be bumps in the road," he added.

Dollar mixed amid rate rise speculation

The dollar was mixed against other major currencies in Asian trade on Wednesday amid growing speculation that the US Federal Reserve may hike interest rates to fight inflation, dealers said.

They said the market was looking ahead to a meeting of Group of Eight finance ministers this weekend, with signs that Washington is seeking to bolster the greenback.

The dollar edged up to 107.48 yen in Tokyo afternoon trade, compared with 107.38 in New York late Tuesday.

The euro rose to 1.5509 dollars after 1.5464 and to 166.69 yen from 166.19 yen.

The market was weighing signals from US officials in support of a strong dollar, said Hachijuni Bank forex dealer Sho Komamura.

"We believe it's just verbal intervention," he said, but added that the remarks still warranted caution.

"The dollar could rise to around 108 yen" in the near future, he said.

Federal Reserve chairman Ben Bernanke has toughened his message on inflation, adding to speculation that the US central bank may hike interest rates later this year.

US Treasury Secretary Henry Paulson this week said the sound health of the world's largest economy would be reflected in the value of the dollar, but did not rule out intervention in the currency market to shore up the greenback.

Analysts said US officials appeared to be trying to talk up the dollar's value in a bid to cool import inflation, with the chances of actual currency market intervention to buy the greenback still seen as limited.

Traders were looking ahead to the meeting of finance ministers from the G8 industrialised nations on Friday and Saturday in Osaka. But with central bank governors absent, currencies may not be a major area of focus.

They said European officials may want to avoid a sharp appreciation of the dollar against the euro in any case because it would add to inflation worries in the eurozone.

The greenback has fallen by around 15 percent against the euro and over 12 percent against the yen in the past year.

Aggressive rate cuts by the Fed in recent months to bolster economic growth have weighed on the US currency.

The dollar rose to 1.3709 Singapore dollars from 1.3669 a day earlier, to 44.45 Philippine pesos from 44.43, to 1,029.75 South Korean won from 1,024, to 33.17 Thai baht from 33.01 and to 30.37 Taiwan dollars from 30.34.

But the greenback eased to 9,320.00 Indonesian rupiah from 9,332.5.

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.

Dollar rebounds in Asian trade

The dollar rebounded slightly in early Asian trade on Monday after plunging at the end of last week on news of a jump in the US unemployment rate, dealers said.

The dollar firmed to 105.17 yen in late Tokyo morning trade from 104.90 in New York late on Friday.

The euro slipped to 1.5770 dollars after 1.5777 but rose to 165.83 yen against 165.55.

"As the stock markets are falling, investors are wavering between selling the greenback and buying it back," said Yuya Koike, a forex dealer at Hachijuni Bank.

Japanese share prices were down more than two percent by the lunch break on Monday, after sharp falls on Wall Street on Friday.

The weaker dollar contributed to a record jump in crude oil prices in New York of more than 10 dollars a barrel on Friday, adding to concerns about the outlook for the global economy.

The oil price rally and the bleak US jobs report triggered the worst day on US stock markets in 15 months as the Dow Jones index plummeted 3.1 percent Friday.

The US jobless rate jumped to 5.5 percent in May as the world's largest economy lost 49,000 jobs, official figures showed.

Most economists had expected a sharply lower unemployment rate of 5.1 percent. The increase was the largest monthly change since February 1986.

Analysts said the yen could benefit from renewed investor jitters as speculators unwind risky "carry trades" that involve borrowing cheap credit in Japan to invest in higher yielding assets elsewhere.

The yen may rise if stocks decline "as equity markets begin to weigh up (a) worsening trade-off between growth and inflation facing central banks," Barclays Capital analysts wrote in a note to clients.

"We think that the foreign exchange and equity markets may be particularly sensitive to upside surprises in inflation data this week," they added.

Dollar firms on inflation worries

The dollar climbed further in Asian trade on Thursday on speculation that the US Federal Reserve will refrain from cutting interest rates again due to inflation worries, dealers said.

The dollar gained to 105.47 yen in Tokyo morning trade from 105.14 in New York late on Wednesday.

The euro dropped to 1.5390 dollars from 1.5440 and to 162.44 yen from 162.38.

The greenback was supported by growing expectations that US interest rates have bottomed, following fresh remarks from Federal Reserve chairman Ben Bernanke expressing concern about inflation, dealers said.

Bernanke said in a speech Wednesday that the record surge in energy costs has created "significant challenges" for the US and world economy although the situation is far different than the oil crisis of the 1970s.

The remarks came a day after Bernanke said a weaker greenback was adding to US inflation pressures, in an rare comment by the Fed chief on currencies.

The Fed next meets on June 24-25 when it is expected to keep rates on hold, having already slashed borrowing costs to 2.00 percent from 5.25 percent.

"In addition to Bernanke's comments, the market got relief from economic indicators," said Marito Ueda, a currency dealer at FX Prime.

An index of the US service sector by the Institute of Supply Management eased to 51.7 in May from 52.0 in April, but remained in the growth mode above 50 percent, suggesting a resilient economy.

Washington also revised up to 2.6 percent the gains in first-quarter US labour productivity from an earlier estimate of 2.2 percent.

The market is now anxious to see Friday's key monthly US payroll report.

"If the figure turns out to be better than market expectations, the dollar may rise further to above the 105.50 yen level," said Ueda.

The European Central Bank and the Bank of England meet on Thursday, when they are expected to leave interest rates unchanged at 4.0 percent and 5.0 percent respectively.

Dollar gains on yen after Bernanke remarks

The dollar extended its gains against the yen in Asian trade on Wednesday after Federal Reserve chairman Ben Bernanke said a weaker greenback was adding to US inflation pressures, dealers said.

They said the market had taken the remarks as a signal that the US central bank will not be in a hurry to cut interest rates again as such a move would be likely to weigh on the dollar.

The dollar firmed to 105.24 yen in Tokyo morning trade from 105.08 in New York late on Tuesday. The euro was little changed at 1.5442 dollars but edged up to 162.45 yen from 162.36.

Bernanke told a conference in Barcelona, Spain that downward pressures on the dollar "have contributed to the unwelcome rise in import prices and consumer price inflation."

He said the Fed was "attentive to the implications of changes in the value of the dollar for inflation and inflation expectations."

Yosuke Hosokawa, chief forex strategist at Chuo Mitsui Trust Bank, said it was unclear how long support from the comments would last because his remarks were fairly general.

"The US is not the only country that does not wish for a weak currency because it imports inflation," he added. A stronger currency puts pressure on the prices of imported goods.

The Fed next meets on June 24-25 when it is expected to keep rates on hold, having slashed borrowing costs to 2.00 percent from 5.25 percent in late 2007.

Bernanke's remarks make another interest rate cut by the Fed unlikely "unless the economy falls over a cliff, which isn't the Fed's forecast," NAB

Capital strategists wrote in a note to clients.

The European Central Bank and the Bank of England meet on Thursday when they are also expected to leave interest rates unchanged.

Traders were also waiting for the release later Wednesday of a private sector payrolls report for May, followed by the closely watched official monthly labour market report due on Friday.

Dollar takes breather in Asian trade

The dollar was steady in Asian trade on Monday as investors sat on their hands ahead of a fresh batch of US economic data, dealers said.

The dollar was quoted at 105.42 yen in Tokyo morning trade, down slightly from 105.51 in New York late Friday.

The euro slipped to 1.5534 dollars from 1.5553 and to 163.81 yen from 164.14.

The Tokyo market looks set for a quiet day's trade, said Saburo Matsumoto, chief forex strategist at Sumitomo Trust Bank.

"Since last week, the dollar has been gaining ground while the yen slowly headed lower," he said.

Whether the greenback could continue to advance would depend on the results of a survey of US manufacturing activity by the Institute of Supply Management due later Monday, as well as Friday's key monthly US jobs report, he said.

Dealers were keeping a close watch on world oil prices following the official start of the Atlantic hurricane season, traders said.

"The persistent and strong correlation between the euro-dollar (exchange rate) and oil prices makes the Atlantic Basin's 2008 hurricane season more important for forex than usual," Barclays Capital analysts wrote in a note to clients.

"Traders will be watching hurricane reports and in particular any risk of a major hurricane sweeping up into the Mexican Gulf and disrupting oil supplies," they added.

The US Federal Reserve has expressed concern about inflationary pressures in recent months as world oil prices have rocketed to record highs.

The Fed has slashed interest rates this year in a bid to boost US economic momentum, but its rate cuts have weighed on the dollar as investors typically prefer to hold currencies in countries with higher returns.

The euro has gained momentum against the dollar in recent months as the European Central Bank has opted not to cut eurozone rates, despite rising inflation worries in Europe.

Dollar steady in Asia amid easing economic concerns

The dollar was range-bound in Asian trade on Thursday, supported by better-than-expected durable goods orders which helped to calm market jitters about the US economy, dealers said.
The dollar was at 104.88 yen in Tokyo morning trade, up slightly from 104.71 yen in New York late on Wednesday.

The euro was steady at 1.5646 dollars after 1.5641 while firming to 164.09 yen from 163.73.

Investors were heartened by the better-than-expected April durable goods orders in the United States, dealers said.

Washington reported that April durable goods orders fell 0.5 percent, but most of the decline was in the transport sector. Excluding that segment, orders were up 2.5 percent.

The (dollar's) latest gains against the major currencies were driven by better news on the economy rather than lower crude oil prices," NAB Capital analyst John Kyriakopoulos wrote in a note to clients.

Official figures showed German inflation accelerated sharply in May, adding to worries about Europe's largest economy and further dashing hopes of a cut in eurozone interest rates.

According to an official projection based on data from six of Germany's 16 states, consumer prices rose 3.0 percent year-on-year, up from 2.4 percent in April and well above the ECB's target of just below 2.0 percent.

The ECB has left its key short-term interest rate unchanged at 4.0 percent since June 2007 to focus on keeping prices under control.

Ian Copsey, a senior financial analyst at Global Forex Trading, said foreign exchange markets were on a knife edge.

"What is very clear is that US figures are beginning to show a semblance of modest stability while European numbers continue to become more and more volatile," Copsey said.

Some market watchers said that the dollar was expected to remain in a narrow corridor against the yen for now.

"We expect the dollar/yen to be locked in a tight range," Chiba Bank analysts wrote in a note to its clients.

"There will be a mix of dollar buying after seeing the better than expected US economic data and selling pressure from exporters," they added.

Dollar supported by higher share prices in Asian trade

The dollar held steady in Asian trade on Wednesday, propped up by a Wall Street rally and a drop in world oil prices, dealers said.

They said weak German and French economic data were weighing on the euro.

The dollar was little changed at 104.19 yen in Tokyo morning trade against 104.24 in New York trade on late Tuesday.

The euro edged down to 1.5682 dollars from 1.5686 and to 163.39 yen from 163.53.

The greenback was "supported by higher share prices and oil prices that calmed down overnight," said Shigeru Nakane, senior chief manager at Resona Bank.

Positive comments on the US economy by San Francisco Federal Reserve Bank Chairman Janet Yellen also helped the greenback, dealers said.

"Market players are now keen to see the upcoming US job report," Nakane said.

Washington is due to release weekly jobless claims on Thursday, while key monthly non-farm payroll figures are due next week.

Traders were also waiting for US durable goods orders due later on Wednesday and revised US first-quarter economic growth on Thursday.

The dollar climbed in US trade overnight after oil prices fell more than three dollars a barrel in New York Tuesday, lifting the greenback against other major currencies despite weak economic data.

The US Conference Board reported Tuesday that consumer confidence plunged to a 16-year low in May in a stuttering economy and as surging oil prices pushed inflation expectations to an all-time high.

The dollar retained its firm tone in Asian trading amid a lack of fresh leads, dealers said.

Masatsugu Miyata, forex dealer at Hachijuni Bank, said the euro's recent gains appeared to be excessive, leaving room for the dollar to regain some ground.

"I feel that the European nations have failed to implement effective measures to fight inflation," he said, noting that weak German data had weighed heavily on the single currency.

Germany's GfK consumer confidence indicator fell to 4.9 points in June compared with 5.6 points in May and against analyst forecasts for an improvement to 5.8.

In France also, INSEE reported business confidence dropped four points to 102 in May, beyond estimates for a more modest fall to 104.

"In that sense, it's about time for the dollar to gain despite its vulnerability to high oil prices," Miyata said.