CURRENCY ASIA
Dollar licks its wounds in Asia
Agence France-Presse
First Posted 11:25:00 08/22/2008
Filed Under: Economy, Business & Finance,Foreign Exchange Markets
TOKYO -- The dollar steadied against the euro and the yen in Asian trade Friday after taking a beating a day earlier on fears about the problems in the US economy and at Wall Street banks.
The dollar was at 108.55 yen in Tokyo morning trade, up slightly from 108.46 in New York late Thursday. The euro slipped to $1.4883 from $1.4898 and to 161.51 yen from 161.60.
The dollar reversed some of its recent gains as investors piled back into commodities, said Hideaki Inoue, forex manager at Mitsubishi UFJ Trust and Banking Corp.
Crude oil prices, which had lost more than $35 a barrel in the past month, rose more than $5 a barrel on Thursday in New York.
Market players "are adjusting their positions on the dollar due to uncertainty about US financial conditions, aggravated by speculation that the troubled investment bank Lehman Brothers may collapse," Inoue said.
Worries about the health of the bank have grown after reports said it failed to sell a stake to Chinese and South Korean investors amid mounting write-downs on its huge holdings of mortgage-backed securities.
But unlike the collapse of Bear Stearns earlier this year, which took markets by surprise, "investors have priced in a potential implosion of Lehman that is expected to drag on for a year or two," Inoue said.
Markets were also depressed by reports that the two largest US mortgage-finance giants, Fannie Mae and Freddie Mac, may need a government bailout after failing to raise cash from private-equity firms.
Traders were waiting for the latest snapshot of British economic growth due to be released later in the day. Sterling has fallen sharply recently against the dollar due to worries about the worsening economy.
The pound was at $1.8748, down from $1.8781 in New York.
Markets are also expected to pay close attention to a speech by Federal Reserve chairman Ben Bernanke Friday to a gathering of economic experts in Wyoming for clues on the outlook for US interest rates.
Last month US inflation rose to a 17-year high of 5.6 percent, rekindling talk of a possible interest rate rise by the central bank to keep a lid on growing price pressures.
The Fed slashed its key interest rate by 3.25 percentage points between September and late April in an attempt to kick-start flagging US growth and calm market turmoil sparked by a credit crunch on Wall Street.
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