The U.S. dollar clawed back some ground against the euro and the yen in Asian trade yesterday after taking a beating on fears about the poor health of the U.S. economy and Wall Street banks.
Markets were waiting for a speech by Federal Reserve chairman Ben Bernanke for clues on the chances of fresh measures to shore up the U.S. financial system.
The dollar rose to 108.93 yen in Tokyo afternoon trade from 108.46 in New York late Thursday. The euro slipped to US$1.4878 from 1.4898 but gained to 162.07 yen from 161.60.
The greenback had fallen sharply on Thursday on worries about problems in the U.S. financial sector and the sluggish state of the world's largest economy.
In addition to concerns about the problems of U.S. mortgage-finance giants Fannie Mae and Freddie Mac, there were also growing worries about the health of Wall Street giant Lehman Brothers, dealers said.
But unlike the collapse of Bear Stearns earlier this year, which took markets by surprise, "investors have priced in a potential implosion of Lehman," said Hideaki Inoue, forex manager at Mitsubishi UFJ Trust and Banking.
The dollar was buoyed by speculation that Bernanke could say something to support the U.S. currency in his speech on financial stability at the Kansas City Fed symposium in Jackson Hole, Wyoming.
"The chances are not slim that the dollar will be boosted by positive comments from Bernanke," Yuzo Sakai, foreign exchange manager at Tokyo Forex and Ueda Harlow, said.
But others warned that any further dollar rallies would soon run out of steam.
"It's very difficult now to find positive factors that will prompt investors to keep buying back the dollar actively," said Deutsche Securities analyst Koji Fukaya. "If the dollar rallies, that may only provide a window of opportunity for players to take profits."
Traders were also 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 US$1.8749, down from 1.8781 in New York.