By Satomi Noguchi
TOKYO, Feb 18 (Reuters) - The dollar was little changed
against the yen and the euro on Monday as many investors stuck to
the sidelines ahead of U.S. data this week to await further clues
on the health of the economy.
Concern about more fallout from credit market turmoil and
bigger losses at financial firms have hurt the U.S. currency,
driving it back near a record low hit against the euro last year.
But traders said the dollar was finding some support on gains
in Asian stock markets as well as hopes that the Federal
Reserve's rate cuts and the newly enacted fiscal stimulus package
could rekindle U.S. economic growth later this year.
The dollar slid on Friday after data showed U.S. consumer
sentiment fell to a 16-year low, reviving fears that the economy
was slipping into a recession while reinforcing expectations for
more Fed rate cuts.
Trading activity was slow on Monday, with U.S. financial
markets closed later in the day for the Presidents Day holiday.
Economic data due this week includes the U.S. consumer price
index and housing starts on Wednesday.
The dollar's weakness was more visible against
higher-yielding currencies such as the Australian dollar.
The Aussie jumped to a three-month high against the dollar,
boosted by its hefty yield advantage and expectations for a
further interest rate rise in March from the current 11-year high
of 7.00 percent.
That contrasts with the Fed's hefty cuts in benchmark
interest rates since September to 3 percent from 5.25 percent,
with investors eyeing another half-percentage-point cut at its
next policy meeting in March -- hurting the dollar's yield
appeal.
"The dollar is likely to stay under broad pressure, but the
magnitude of its slide will be different depending on the
currency it is sold against," said a senior trader at a big
Japanese bank.
"Given dollar short positions remain big, the U.S. currency's
drop against the yen will be only gradual for now."
The dollar edged up to 107.85 yen <JPY=> from near 107.75 yen
in U.S. trade late last week, staying in a range between a
three-year low of 104.95 yen hit in January and a high of 108.62
yen hit last week.
The U.S. currency briefly rose above 108 yen in early Asian
trade as short-term speculators covered short positions, but thin
volumes made movements choppy, traders said.
The Australian dollar was up about 0.5 percent against the
dollar at $0.9128 <AUD=D4> after climbing to a three-month peak
of $0.9134.
The euro edged up 0.1 percent to $1.4687 <EUR=> and rose 0.2
percent against the yen to 158.44 yen <EURJPY=R>.
The euro has bounced back against major currencies after
European Central Bank officials cooled speculation of lower rates
later in the year.
The yen was weaker against high-yielding currencies, with the
Australian dollar rising 0.6 percent to 98.42 yen <AUDJPY=R> and
the New Zealand dollar up 0.5 percent at 85.51 yen <NZDJPY=R>.
The Nikkei stock average <> edged up 0.3 percent after
having risen nearly 5 percent last week, posting its first weekly
gain this year.
Rising stocks and somewhat calmer financial markets have
prodded some investors to switch back into carry trades in which
they borrow the low-yielding yen to fund purchases of
higher-yielding currencies and assets.
Analysts say such carry trades funded in the yen are likely
limited as the flare up of market volatility since last August
has already prompted many investors to abandon those positions.
(Additional reporting by Chikako Mogi; Editing by Eric
Burroughs)
