Dollar extends losses against yen

 

The dollar slid against the yen in Asian trade on Thursday after soft US economic data eroded recent optimism that the fallout from the subprime loan crisis might be easing, dealers said.

 

But the greenback recovered some ground against the euro after tumbling in overseas trade following an unexpectedly strong report on eurozone business confidence.

 

The dollar dropped to ¥98.75 in Tokyo late morning trade from ¥99.11 in New York late Wednesday.

 

The euro fell to $1.5802 from $1.5845 and to ¥156.02 from ¥157.08.

 

Overnight, the US government reported an unexpected 1.7 per cent decline in durable goods orders in February and a 1.8 per cent fall in new home sales.

 

"The weak data on durable goods and the US housing market are keeping the dollar under pressure," said Kanako Oikawa, a currency strategist at Traders Securities.

 

"The data reinforced concerns about the US economy after the Fed action, including the rescue of Bear Stearns through JPMorgan, which had brought some relief to the market," she said.

 

Markets are unsure where the dollar is now heading amid uncertainty about whether the worst of the recent credit crunch that has roiled global markets is yet over.

 

"Although the dollar resumed its downtrend following a set of weak economic data, it is still difficult to judge whether the recent rebound of the dollar has come to an end, or whether the fall is a blip," said Chuo Mitsui & Trust Banking Co Ltd forex dealer Yosuke Hosokawa.

 

The euro got a boost after a business climate index from Germany's Ifo institute rose to 104.8 points in March from 104.1 in February, surprising analysts who had expected a fall to 103.4 points.

 

The report helped lift the euro up towards its March 17 all-time high of $1.5905.

 

Meanwhile European Central Bank chief Jean-Claude Trichet, speaking to the European Parliament, suggested that eurozone interest rates would likely remain on hold while inflation is a risk.

 

"Trichet's remarks showed that the ECB's main concern is price stability which allayed speculation of a rate cut," said Oikawa.

 

"Meanwhile the Federal Reserve is likely to make another rate cut, or at least keep rates at current levels," she said.

 

The Fed has now slashed its federal funds rate by 300 basis points from 5.25 per cent last September, reducing the appeal of certain US assets compared with higher-yield assets in other countries.

But dealers said the dollar may find some downside support against the yen owing to concern that the Bank of Japan's closely watched Tankan survey will show a sharp deterioration in business sentiment next week. (AFP)