* Dollar jumps on news U.S. govt considering asset plan
* Yen falls broadly as stock rally eases risk aversion
By Rika Otsuka
TOKYO, Sept 19 (Reuters) - The dollar jumped against the
euro and the yen on Friday, boosted by news that the U.S.
government is considering a comprehensive plan to deal with the
toxic bank assets causing the credit crisis.
U.S. Treasury Secretary Henry Paulson and Federal Reserve
Chairman Ben Bernanke plan to work through the weekend on a plan
that congressional leaders said would focus on dealing with
illiquid assets. []
Such assets have shattered bank balance sheets, and pushed
Lehman Brothers <LEH.N> to file for bankruptcy protection and
prompted the bailout of American International Group <AIG.N>
this week.
The plan could involve setting up a fund to buy distressed
assets from banks, something like the Resolution Trust
Corporation (RTC), which was used to clean up bad debts from the
savings and loan crisis in the late 1980s.
Investors bought the dollar as they believe the new steps
will be comprehensive in tackling problems in the financial
system rather than just coping with troubles at individual
financial firms, said Masafumi Yamamoto, head of foreign
exchange strategy for Japan at Royal Bank of Scotland.
"The news helped ease investor jitters over risk assets, as
well as sparking dollar-buying," Yamamoto said.
The dollar index <.DXY>, which tracks the U.S. currency's
performance against six major currencies, was up 1.2 percent at
79.049.
The euro dropped 1.3 percent from late U.S. trade to $1.4160
<EUR=>, extending its fall from Thursday's high of $1.4543,
which was a two-week high.
The dollar climbed 1.6 percent to 107.10 yen <JPY=>, jumping
more than 1 yen from the day's lows around 105.40 yen.
The yen fell broadly as Asian stocks rose on hopes for a
more effective solution to the financial crisis that has roiled
markets worldwide, soothing investor risk aversion.
Tokyo's Nikkei share average <> surged 3 percent while
stocks in South Korea and Hong Kong soared 4.3 percent and 6.5
percent, respectively.
Yen buying had been fuelled by the unwinding of carry
trades, in which market players use the low-yielding Japanese
currency to fund purchases of assets offering higher returns
elsewhere.
The euro rose 0.3 percent to 151.70 yen <EURJPY=R>. The yen
also weakened 1.7 percent against the high-yielding Australian
dollar <AUDJPY=R> and fell 1.1 percent versus sterling
<GBPJPY=R>.
Still, market players said financial markets remain shaky
even after the Federal Reserve and other top central banks
offered to pump billions of dollars into global markets to ease
funding pressure. []
Heightened jitters about the banking sector this week after
the collapse of Lehman Brothers and the bailout of troubled
insurer AIG exacerbated tention in financial markets with banks
reluctant to lend to one another.
"The hopes lifting stocks this session are on very fragile
ground because there is still a great amount of uncertainty over
the details of the U.S. crisis plan," said a senior manager of
the forex sales group for a European bank.
"The optimism in the market can last only for the weekend,"
the manager said.
(Additional reporting by Satomi Noguchi; Editing by Chris
Gallagher)
