(Updates prices, adds quotes, changes byline, dateline;
previous LONDON)
By Gertrude Chavez-Dreyfuss
NEW YORK, March 25 (Reuters) - The dollar weakened broadly
on Tuesday, surrendering gains made over the last four
sessions, as concerns about the health of the U.S. economy and
the global financial sector continued to weigh on investors.
The interbank cost of borrowing three-month dollar,
sterling, and euro funds rose on Tuesday, suggesting financial
institutions were still hoarding cash despite efforts by
central banks to inject liquidity into the money market.
The dollar had rallied in the lead-up to the Easter break
last week after a steep bout of profit-taking in commodity
markets saw investors retreat to cash.
Those gains were extended on Monday as JPMorgan <JPM.N>
raised its offer to buy Bear Stearns <BSC.N> five-fold to about
$10 a share. Data showing a rise in sales of existing U.S.
homes sales last month also helped, boosting a global stocks
rally and demand for corporate debt.
But doubts about the overall outlook for the United States
put investors back in "sell dollar" mode due to worries about
the extent and depth of the economy's slowdown despite
aggressive Federal Reserve efforts to boost liquidity in the
financial system.
"We still have a number of concerns for the U.S. consumer.
So I think yesterday's positive sentiment on the U.S. dollar
quickly evaporated," said David Watt, senior currency
strategist, at RBC Capital Markets in Toronto.
In early New York trading, the euro was up 1 percent on the
day at $1.5584 <EUR=> after falling as low as $1.5341 in the
previous session. The single currency is down roughly 1.9
percent from last week's record high of $1.5904, but still up
6.8 percent on the year to date.
The dollar tumbled to a record low against the euro and a
13-year trough of 95.77 yen last week when the announcement of
Bear Stearns' takeover at a rock bottom price stoked fears that
other major financial firms could be casualties in the crisis.
SOVEREIGN INTEREST IN EUROS?
Analysts also cited talk that Asian central banks'
sovereign wealth funds sold the dollar against the euro on
Tuesday.
"The widespread talk of sovereign interest in the euro of
course cannot be confirmed and is often a ready-made
explanation for price swings. However, it is clear the recent
price action forced many players to lose positions that they
seemed to eager to re-establish," said Brown Brothers in a
research note.
RBC's Watt also pointed to the U.S. interest rate market,
where the outlook remained skewed to the downside. U.S. rate
futures markets on Tuesday are indicating a 36 percent chance
of a half percentage point easing at the next Federal Reserve
policy meeting.
In contrast, euro zone interest rate futures fell sharply
and are no longer fully pricing in an easing in European
Central Bank rates this year.
Still, European rhetoric about the euro's recent climb also
continued with comments from ECB Vice-President Lucas Papademos
who said recent moves in exchange rates had been excessive
[].
The dollar was down 0.6 percent against the yen at 100.05
yen <JPY=>, erasing earlier gains above 101 yen. The dollar
also fell 0.9 percent to 1.0094 Swiss francs.
High-yielding currencies performed strongly, drawing
support from rising stock markets, with Japan's Nikkei share
average <> jumping 2.1 percent and European stocks surging
3 percent.
The New Zealand dollar was up 0.6 percent at US$0.8024
<NZD=> while the Australian dollar rose 0.8 percent to
US$0.9065 <AUD=>.
Investors will look to Conference Board's report on
consumer confidence in March due 1000 am EDT (1400GMT).
(Additional reporting by Veronica Brown in London; Editing
by Chizu Nomiyama)
