By Naomi Tajitsu
TOKYO, Feb 29 (Reuters) - The dollar hit a three-year low
versus the yen and hung near record troughs against other
currencies on Friday after Federal Reserve Chairman Ben
Bernanke's warning on the health of small U.S. banks pointed to a
struggling economy and suggested interest rates may fall more.
The U.S. currency hit an all-time low against the euro and a
basket of major currencies on Thursday. It also remained under
pressure in the wake of data showing the U.S. economy barely grew
at the end of 2007, while weekly jobless claims rose.
The dollar <JPY=> broke below the psychologically important
105.00 yen level in early Tokyo trade, triggering a wave of
stop-loss selling orders that drove it down as far as 104.57 yen,
its lowest since May 2005.
Traders said the U.S. currency would continue to take a
beating as investors speculate that the Fed may prioritise growth
over inflation risks in the near term, clearing the way for more
rate cuts after a 225 basis point decrease since September.
"The only way forward for the dollar is down, as recent
ranges have been broken completely," said a senior trader at a
European bank.
DOLLAR BATTERED
The dollar index <.DXY> was at 73.823, near a record low
73.625 hit on Thursday, and was en route to its biggest weekly
loss in more than two years.
The dollar smarted after Bernanke told the U.S. Congress he
expected "some failures" among small U.S. banks due to the
financial stress of housing market woes and mortgage losses.
[]
The euro <EUR=> hovered around $1.5180, down 0.3 percent on
the day and pulling back from a jump to an all-time high of
$1.5231 on Thursday.
A 1 percent slide in the single European currency against the
yen <EURJPY=R> helped to inspire some profit-taking on the euro's
gains versus the dollar, given that it was on track to post its
biggest weekly rise in three months.
The U.S. currency traded around a record low against the
Swiss franc <CHF=>, and hovered near its lowest levels against
the Australian and New Zealand dollars in more than 20 years.
Against sterling <GBP=D4>, the dollar hovered near a
two-month trough hit earlier in the week.
Meanwhile, the yen rallied across the board, bumping the
high-yielding Australian <AUDJPY=R> and New Zealand dollars
<NZDJPY=R> and sterling <GBPJPY=R> down nearly 1 percent each.
"Losses in the dollar/yen are driving yen crosses lower,"
said Hiroshi Yoshida, a forex manager at Shinkin Central Bank,
adding that a 2.5 percent tumble in the Nikkei share average
<> was also helping to boost the yen.
Stock market moves are often considered a gauge of risk
appetite, and falls in Asian shares on Friday prompted some
investors to unwind risky carry trades, in which they use the
low-yielding yen to buy assets in higher-yielding currencies.
Some in the market said Japanese data released on Friday
showing a surprising jump in consumer spending, and rising
consumer prices also helped to push the yen higher.
Further dollar/yen falls in the Tokyo session may be limited
by demand from Japanese importers, traders said, but they added
that the dollar may come under more selling pressure later in the
day when London trade gets under way.
(Additional reporting by Chikako Mogi; Editing by Hugh Lawson)
