* Fannie, Freddie, Lehman concerns weigh on dollar
* Dollar index on track for worst loss in two months
* Yen rises broadly, up more than 1 pct vs Aussie dollar
(Updates prices, adds quotes, adds byline)
By Gertrude Chavez-Dreyfuss
NEW YORK, Aug 21 (Reuters) - The dollar fell across the
board on Thursday, pressured by persistent worries over the
U.S. financial sector that also sparked a broad flight from
risky trades, pushing the Japanese yen sharply higher.
The U.S. dollar index <.DXY>, a gauge of its value against
a basket of six major currencies, was on track to post its
worst one-day fall in two months.
A rise of more than 2 percent in oil prices <CLc1> further
stoked the negative sentiment toward the dollar, which was
already bubbling on concerns over the viability of U.S.
mortgage agencies Fannie Mae <FNM.N> and Freddie Mac <FRE.N>,
and investment bank Lehman Brothers <LEH.N>.
"The dollar is making a broad-based correction due to
concerns over the financial sector, notably the Fannie and
Freddie stories. Lehman also got the market's attention," said
Vassili Serebriakov, a currency strategist at Wells Fargo in
New York.
The Financial Times said on Thursday that Lehman, which
some analysts said could soon announce write-downs of up to $4
billion, held talks to sell 50 percent of its shares to China's
CITIC Securities and state-owned Korea Development Bank but
both firms walked away, saying the price was too high.
A Lehman spokeswoman declined to comment on the report.
Renewed worries about one of Wall Street's most venerable
banks and broad increase in risk aversion pushed the dollar
further down from its 2008 highs struck earlier this week but
boosted the yen.
The yen usually gets a boost when investors sell riskier
and higher-yielding assets purchased with the Japanese
currency's low interest rates.
Still, Wells Fargo's Serebriakov remained optimistic about
the dollar's prospects. "Given the scope of the dollar's moves
over the past two weeks, this correction is not too surprising
and is actually quite modest. I don't think this puts into
question the dollar's recovery."
In early New York trading, the dollar was down 1.4 percent
against the yen at 108.27 yen <JPY=>, on track for its sharpest
daily loss since March.
The decline against the yen was the main driver of a 0.7
percent fall in the dollar index on the ICE Futures Exchange to
76.363 <.DXY>.
The euro was down 0.7 percent against the yen at 160.76 yen
<EURJPY=>, but was up 0.6 percent versus the dollar at $1.4834
<EUR=>.
Data on Thursday showing a fall in the weekly U.S. initial
jobless claims briefly helped the dollar trim losses versus the
euro.
The Labor Department said initial claims for state
unemployment insurance benefits dipped 13,000 to a seasonally
adjusted 432,000 in the week ended Aug. 16 after falling a
revised 12,000 a week earlier. That was well below the 443,000
claims economists polled by Reuters had expected for the latest
week.
Still the four-week moving average of new jobless claims,
viewed as a better gauge of underlying labor trends because it
smooths the week-to-week volatility, rose to its highest since
December 2001.
"We still have no clear sense of trend, but the prevailing
feeling is that there has been some at least slight
deterioration in recent weeks in jobless claims," said Alan
Ruskin, chief international strategist, at RBS Global Banking
and Markets. "This is a month where non-farm payrolls will
clarify the view on claims rather than the other way around."
Relatively high-yielding and "riskier" currencies such as
the Australian and New Zealand dollars were off sharply against
the yen, losing 1.3 percent to 94.62 yen <AUDJPY=R> and 0.8
percent to 77.59 yen <NZDJPY=R> respectively.
(Additional reporting by Jamie McGeever in London; Editing by
Tom Hals)
