The dollar stayed firm in Asian trade yesterday as investors welcomed a large cash infusion into Merrill Lynch amid the subprime mortgage woes, dealers said.
The U.S. unit stood at 114.00 yen in afternoon trade, easing slightly from 114.40 yen in New York Monday afternoon, but sharply up from 113.07 yen on Friday in Tokyo before Japanese players went into a three-day weekend.
The Tokyo market was off Monday for a national holiday.
The euro stood at 1.4391 dollars and 164.06 yen, compared with 1.4401 dollars and 164.50 yen in New York.
Investors were heartened by the announcement that Merrill Lynch had won large cash infusions of up to US$6.2 billion from various investors, including US$4.4 billion by a Singapore state-owned investment group.
Financial markets have seen turbulence for months over concerns about the U.S. "subprime" sector, in which high-risk customers extended loans at the height of the housing boom are struggling to make mortgage payments.
The subprime trouble has raised worries about a credit crunch as financial institutions rush to cover their losses.
"With the news about Merrill, there is a sense that we are seeing the last of all the bad news," said Mitsuru Sahara, senior vice president at Mitsubishi UFJ Bank.
"It appears that participants are willing to take more risks. We saw American brokerages being hit hard, but either they are receiving some sort of help or the impact of the damages is now ending."
He said the market was also returning "to the situation where people are again wanting to place their funds in nations with high-interest currencies."
Japan has the lowest interest rates of any major economy. Dealers looking for higher returns often place cash in high-interest rate economies such as Australia and New Zealand.
Investors are returning to the dollar, although the subprime woes still made them cautious, Societe Generale Asset Management senior economist Akio Yoshino said.