TOKYO, Japan -- The dollar dipped against the euro on Wednesday a day after the US currency surged on hopes that US lawmakers could still reach agreement to revive a $700-billion bank bailout plan to stem the credit crisis.

The market's focal point remains whether Congress will be able to pass a package to buy toxic assets from struggling banks in an effort to revitalize strained lending markets.

The dollar had rallied as investors bet Washington would manage to salvage the package after its shock rejection by the House of Representatives on Monday.

"While the dollar lacks clear direction, investors are likely to be moved between hope and despair by developments in Washington," said a senior trader at a Japanese brokerage.

Talk that lawmakers may agree to a bailout package soon and speculation that global central banks could cut interest rates encouraged investors to take risks on Tuesday, sparking a sharp rebound in US stocks after Wall Street saw its biggest one-day sell-off since 1987.

The euro edged up 0.1 percent from late US trade to $1.4110.

On Tuesday, the euro plunged 2.4 percent against the dollar, posting the biggest drop since the single currency was introduced in 1999, after news of another bank bailout in Europe worsened fears about widening fallout from the credit crisis.

The dollar rose 0.2 percent against the yen to 106.30 after jumping nearly 2.0 percent the previous day.

Traders said Tuesday's surge was partly explained by repatriation of overseas assets by US investors, as well as a dollar-shortage at some institutions before the end of the July-September quarter.

The Bank of Japan's tankan quarterly survey showed Wednesday that business sentiment has turned pessimistic for the first time in five years, a sign that a global slowdown and financial turmoil were taking a toll as the economy teeters on the brink of recession.

The market showed a muted reaction to the tankan as the outcome was mostly in line with expectations.

The euro rose 0.3 percent to 150.04 yen.