By Eric Burroughs
TOKYO, March 26 (Reuters) - The dollar was little changed on
Wednesday as investors remained nervous about the health of the
U.S. economy and financial system, while a rebound in gold and
commodity prices spurred some light selling of the greenback.
Renewed calm in financial markets also prompted market
players to sell the dollar and buy gold and oil in what has been
a popular trade betting that the global economy will withstand
the troubles in the United States.
The euro had surged more than 1 percent against the dollar on
Tuesday after U.S. data showing consumer confidence hitting a
five-year low and consumer expectations sinking to the lowest
since 1973, while house prices fell further across much of the
country.
Analysts said the latest news highlighted the fact that the
U.S. economy is probably in a recession.
"In the near term we could see the dollar trading on the back
foot as investors choose to put their money into assets that give
them a higher return or yield," said Sharada Selvanathan, a
currency strategist at BNP Paribas in Hong Kong.
But Selvanathan said the dollar may stage a rebound in the
medium term.
The dollar has gradually pulled up from record lows against
the euro and a 13-year low versus the yen in the past week as
investors have hoped the worst of the financial crisis stemming
from the U.S. subprime mortgage market may be over after the
collapse of investment bank Bear Stearns.
The euro dipped to $1.5630 <EUR=> from near $1.5650 in late
U.S. trade after hitting the day's high of $1.5668 on the rise in
commodities.
On Tuesday the euro posted its second-biggest one-day rise
for two years and climbed back towards the record peak of $1.5905
set last week.
Gold edged up to $940 <XAU=> and has risen around 4 percent
from a one-month low struck last Thursday. []
The dollar was down slightly at 99.95 yen <JPY=> from near
100.00 yen, while the euro retreated to 156.20 yen <EURJPY=R>
from 156.48 yen.
The Federal Reserve's array of efforts to ease the strains in
financial markets and limit the damage to the economy have also
helped improve investor confidence.
The Fed has chopped short-term rates to 2.25 percent from
5.25 percent six months ago, even as the European Central Bank
has kept rates steady at 4 percent.
"Central banks appear to have done enough in the short term
to stabilise market sentiment and provided much-needed breathing
space for risk appetite," said currency strategists at UBS in a
note to clients.
Investors are now awaiting Germany's Ifo survey, which is
forecast in a Reuters poll to fall to 103.4 from 104.1. The
confidence figure is seen as a key barometer of how the biggest
economy in the euro zone is faring.
A decline in Asian stock markets made some traders cautious
about using the low-yielding yen as a cheap source of funds to
buy higher-yielding currencies in carry trade.
The New Zealand dollar, a bellwether of the carry trade,
dipped about 0.7 percent against the yen to 80.17 yen <NZDJPY=R>.
Japan's benchmark Nikkei share average <> was down 1 percent
in afternoon trade.
The market shrugged off data showing Japan's trade surplus
rose only 0.9 percent in February from a year earlier. Exports
beat forecasts thanks to solid shipments to Europe and China, but
a surprisingly big rise in imports eroded the contribution.
[]
(Additional reporting by Rika Otsuka)
