By Chikako Mogi
TOKYO, April 3 (Reuters) - The dollar hit a three-week high
versus the yen and rose against the euro on Thursday as buying
from hedge funds and investors at the start of Japan's fiscal
year offset gloomy remarks by Federal Reserve Chairman Ben
Bernanke.
The U.S. currency fell overnight and remained pressured
earlier in the session after Bernanke said the U.S. economy may
fall into recession in the first half of 2008, hurting sentiment
towards the dollar.
"Cash positions had been building up as investors held back
from buying the dollar even when sentiment began to improve after
the Bear Stearns bailout, as the Easter holidays and quarter-end
and Japan's fiscal year-end came in between," said a senior
dealer at a Japanese trading house.
"Such dollar-buying needs overshadowed what would have been
dollar-negative comments from Bernanke," he said.
The dealer added that market players may be picking up on
what suits their current positive sentiment, such as Bernanke
expecting a recovery later in 2008 or stressing rising
uncertainty about the inflation outlook.
The dollar also benefited from lingering hope that the worst
of the credit crisis was over.
Bernanke's remarks came at a time of improving sentiment
among traders over the credit market woes, with U.S. investment
bank Lehman Brothers <LEH.N> raising $4 billion on Tuesday to
shore up its balance sheet.
"Market players are buying the dollar back on optimism that
the sharp downturn in the credit market is bottoming out," said a
trader at a Japanese trust bank.
The euro fell 0.4 percent to $1.5623 <EUR=>, after rising 0.5
percent on Bernanke's comments on Wednesday. The euro has come
under pressure as players see the single currency's recent push
to a record high $1.5905 as being a bit too forced.
The dollar was up 0.5 percent at 102.75 yen <JPY=>. It
climbed to a three-week high of 102.85 yen, up from the day's low
of 102.22 yen.
The U.S. unit rose 0.6 percent to 1.0140 Swiss francs <CHF=>
after falling 0.4 percent on Bernanke's comments, while sterling
slipped 0.1 percent to $1.9858 <GBP=> after gaining 0.6 percent.
DOLLAR FALL CONTAINED?
Financial markets had regained some stability following
aggressive steps by the Fed to calm credit market turmoil and
prevent the U.S. economy from deteriorating sharply. They also
found some solace after JPMorgan Chase <JPM.N> agreed to acquire
ailing U.S. investment bank Bear Stearns <BSC.N> last month.
"The comments (from Bernanke) are definitely not
dollar-positive and cooled optimism about the credit problems
which have been spreading recently," said a senior dealer at a
European bank.
He said the dollar's falling trend may be contained in the
near term by various factors such as investors returning to carry
trades, Japanese buying of foreign assets at the start of the new
business year and short-covering of recent deep dollar selling.
Traders are now eyeing Friday's U.S. employment report, which
is expected to show the economy shed jobs in March for a third
straight month, with economists seeing a 60,000 cut after a
63,000 loss in February.
But a report on Wednesday from ADP Employer Services
surprised markets by showing the economy added 8,000
private-sector jobs in March against market expectations for a
48,000 loss.
The Fed has cut its benchmark interest rate since September
to 2.25 percent from 5.25 percent, while the European Central
Bank has held rates firm at 4 percent to fend off euro zone
inflation, which hit a record high in March.
(Additional reporting by Satomi Noguchi; Editing by Brent
Kininmont)
