By Rika Otsuka
TOKYO, March 24 (Reuters) - The dollar rose against the euro
on Monday, extending its recovery from a record low hit last week
as investors sold commodities such as oil and gold and bought
back the U.S. currency ahead of the end of the first quarter.
The dollar was also supported by the Federal Reserve's
aggressive efforts to ease the credit crisis.
Activity was subdued in Asia, however, as markets in many
parts of the region as well as in Europe remained closed, with
investors waiting for U.S. trade to resume later in the day.
"Investors are taking profits on any assets that have rallied
in the past months ahead of the end of the first quarter," said a
senior currency trader at a big Japanese bank. "This could last
for a few more days.
"The euro is likely to slide further as many still hold long
euro positions with hefty unrealised profits," the trader said.
The euro fell 0.4 percent to $1.5370 <EUR=> from around
$1.5445 in late Asian trading on Friday, slipping further from a
record high of $1.5905 struck on electronic trading platform EBS
last week.
The single currency hit a record peak versus the dollar after
the collapse of U.S. investment bank Bear Stearns <BSC.N> in
mid-March fanned concerns about the spreading credit crunch.
But confidence in U.S. assets was partially restored after
the Fed unveiled steps to relieve the credit crisis, helping the
dollar.
Among an array of initiatives, the U.S. central bank pushed
JPMorgan Chase <JPM.N> to acquire Bear Stearns, started lending
directly to securities firms for the first time since the Great
Depression and lowered the benchmark fed funds rates by 75 basis
points to 2.25 percent.
Traders said a report in the New York Times that JPMorgan
Chase is in talks to increase its offer for Bear Stearns to $10
per share from an initial $2 may give another boost to the dollar
when U.S. markets reopen on Monday, though there was little
reaction during Tokyo trading.
The Australian dollar slid near a one-month low against the
U.S currency as commodities extended last week's deep falls and
gold <XAU=> dropped close to a one-month low touched on Thursday.
"The profit-taking moves are seen across the markets and the
Aussie is included as a selling target along with commodities,"
said Shuichi Kanehira, a senior trader at Mizuho Corporate Bank.
The Aussie dropped 0.2 percent to $0.9000 <AUD=D4> and fell
near $0.8954 touched on Thursday, slipping from a 24-year high
around $0.95 hit late last month.
DOLLAR GAINS SEEN LIMITED
Despite the dollar's broad rise in the past few sessions,
many traders expect further gains to be limited.
The Fed and the Bank of England denied a report on Saturday
that they were in talks over possibly using public funds to make
mass purchases of mortgage-backed securities -- key financial
instruments which have plunged, wreaking havoc on banks' balance
sheets and shares -- to ease the credit crisis. []
"One can hardly say that fundamental problems in credit
markets have been resolved, thus it is still too early to chase
the dollar higher," said Hiroshi Yoshida, a forex trader at
Shinkin Central Bank.
The dollar rose 0.3 percent against the yen to 99.90 yen
<JPY=>, keeping some distance from a 13-year low of 95.77 yen hit
on EBS early last week.
Many market players believe the U.S. currency is unlikely to
fall below that 13-year trough in the short term as the Bank of
Japan is not expected to raise benchmark interest rates soon from
the current 0.5 percent -- the lowest among industrialised
nations.
Government data showed on Monday that big Japanese
manufacturers' confidence in business conditions tumbled to a new
low in January-March, adding to the view that the BOJ will stand
pat for a while. []
At the same time, the dollar is not expected to rise sharply
above the psychologically key 100 yen level as Japanese
exporters, many of which are worried that the dollar is still in
a downward trend, are seen likely to sell it above that level.
The dollar jumped 0.8 percent against the Swiss franc to
1.0170 franc <CHF=>. The U.S. currency struck an all-time low
around 0.9630 franc early last week.
(Additional reporting by Satomi Noguchi, Editing by Michael
Watson)
