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Dollar eases in Asian trade

TOKYO - The dollar lost ground in Asian trade Thursday, pressured by continued worries about the health of the US economy and financial markets, dealers said.

The dollar fell to 108.91 yen in Tokyo afternoon trade from 109.88 in New York late Wednesday. The euro rose to 1.4792 dollars from 1.4745 but slipped to 161.13 yen from 162.07.

‘Fears about the US economy are growing again,’ said Sumitomo Trust Bank chief strategist Saburo Matsumoto, adding that the fallout from the financial crisis on Wall Street has not yet run its course.

The single currency has rebounded from a six-month low of 1.4631 dollars struck on Tuesday as renewed worries about the health of US mortgage finance giants Fannie Mae and Freddie Mac weigh on the greenback.

Dealers said the dollar might come under selling pressure if upcoming US economic indicators, including weekly jobless claims due Thursday and next week's monthly employment report, disappoint markets, dealers said.

‘We might see some further scaling back of already diminished expectations for the Federal Reserve to raise interest rates over the next six months,’ wrote NAB Capital strategist John Kyriakopoulos in a note.

Reports quoting Gary Stern, president of the Federal Reserve Bank of Minneapolis, as saying that now is ‘a good time to be patient’ added to speculation that the US central bank is in no hurry to raise interest rates.

The Fed has now kept its key lending rate on hold for two straight policy meetings after slashing rates by 3.25 percentage points between September and late April in an attempt to kick-start flagging US growth.

The European Central Bank's benchmark rate stands at 4.25 percent but there is speculation that it may be lowered next year due to growing concerns about the health of the eurozone economies.

Some market watchers said the euro might have climbed too far too fast.

‘The euro may still be overvalued in light of the area's economic conditions,’ Akio Shimizu, head of foreign exchange trading at Mitsubishi UFJ Trust and Banking, told Dow Jones Newswires.

‘If oil prices start to fall again, the euro could go down in tandem.’

The yen shrugged off news that Japan's trade surplus shrank 86.6 percent in July amid weak demand in the United States, with investors taking some comfort from a rebound in overall exports.

Against regional Asian currencies, the dollar rose to 1,054.90 South Korean won from 1,048.90 on Wednesday, to 1.4116 Singapore dollars from 1.4092 and to 31.44 Taiwan dollars from 31.38.

But the greenback fell to 9,155.50 Indonesian rupiah from 9,182.5, to 45.65 Philippine pesos from 45.68 and to 34.06 Thai baht from 34.14.