By Rika Otsuka
TOKYO, April 22 (Reuters) - The dollar steadied against the
euro on Tuesday, keeping losses made after softer than expected
profits from Bank of America rekindled concerns the fallout from
the credit crisis may not be over.
The yen firmed broadly as a slide in Asian stocks prompted
investors to trim risky yen carry trades, in which players use
the low-yielding Japanese currency to finance purchases of assets
offering higher returns elsewhere.
"Weaker share prices sparked yen buy-backs, while some
investors also booked profits on the dollar's recent rise against
the yen," said a trader at a Japanese trust bank.
The euro was supported after a Financial Times Deutschland
report on Tuesday quoted European Central Bank Governing Council
member Yves Mersch as saying that the central bank has to ask
itself each month whether a rate rise is needed to control
inflation. []
The euro steadied from Monday's late U.S. level at $1.5907
<EUR=>, not far from the record high of $1.5985 hit on trading
platform EBS last week.
The dollar fell 0.2 percent to 103.04 yen <JPY=>, having
pulled away from a seven-week peak of 104.66 yen hit on EBS late
last week.
Sporadic selling by Japanese exporters helped push the dollar
lower against the yen, traders said.
The euro dipped 0.2 percent to 163.90 yen <EURJPY=R>. On
Monday, the euro struck a four-month high of 164.86 yen on EBS.
In the stock market, Japan's benchmark Nikkei share average
fell around 1 percent <>.
EURO SEEN HIGHER
Mersch's comments came a day after ECB Governing Council
member Klaus Liebscher said there was no reason for pessimism on
euro zone growth, suggesting the ECB will keep interest rates at
a six-year high of 4.0 percent for a while. []
"Investors feel more comfortable picking up the euro thanks
to its yield advantage over the dollar," said Hiroshi Yoshida, a
forex trader at Shinkin Central Bank.
"It's only a matter of time before the euro hits the key $1.6
level as investors believe there are fewer risks in buying the
euro," he said.
The market expects the Federal Reserve to further lower rates
from the current 2.25 percent at a policy meeting later this
month.
Bank of America Corp <BAC.N>, the No.2 U.S. bank, reported on
Monday a 77 percent decline in first-quarter profit due to
write-downs and rising credit losses. []
The bank's report cooled risk appetite, sparking dollar
selling by investors who had hoped the worst of the bank losses
stemming from the troubled U.S. housing sector were out.
Citigroup <C.N>, the largest U.S. bank, on Friday reported a
hefty quarterly loss, but investors welcomed its aggressive steps
to resolve credit problems and felt more confident about the
financial sector. []
Sterling rose 0.1 percent to $1.9812 <GBP=D4>, trimming some
losses after sliding on Monday due to soft UK house price data,
and as a Bank of England plan to ease credit market strains
failed to impress.
The BoE unveiled a plan on Monday to swap banks' risky
mortgage assets for at least 50 billion pounds ($99 billion) of
government debt in the latest bid to spare Britain from the
ravages of a global credit crunch. []
The Canadian dollar dipped to C$1.0073 against the U.S.
dollar <CAD=D4> from around C$1.0050 in late U.S. trade on
Monday, pressured by expectations of an imminent interest rate
cut.
The Bank of Canada will announce its rate decision later in
the day, with many dealers expecting the central bank to slash
rates by 50 basis points to 3.0 percent.
(Additional reporting by Masayuki Kitano; Editing by Brent
Kininmont)
