By Rika Otsuka
TOKYO, March 21 (Reuters) - The dollar edged higher against
the yen and Swiss franc on Friday, recovering to post a rise on
the week after initially plunging to record lows as the collapse
of Bear Stearns stirred fears about the broadening credit crunch.
The dollar clung to gains as investors sold commodities such
as oil and gold and bought back the U.S. currency, partly to take
profits on winning positions before a long weekend and the first
quarter wraps up on Monday.
"The dollar firmed as players such as hedge funds are
aggressively booking profits everywhere, turning the funds into
dollars," said Hideki Amikura, forex manager at Nomura Trust and
Banking.
"We don't know yet whether it means the end of the credit
market turmoil that has hit the dollar or just an end of the
first act," Amikura said.
Trade was subdued as many markets across the world were
closed for Easter weekend holidays. In Asia, most markets besides
Japan were closed. Major European and U.S. markets are also
closed on Friday.
Market players said it was too early to expect a sustained
rebound in the dollar, which plummeted to a near 13-year trough
against the yen at the start of this week as well as record lows
versus the euro and Swiss franc.
But confidence in U.S. assets was partially restored by the
Federal Reserve's aggressive efforts to relieve the credit
crisis.
Among the array of initiatives, the Fed pushed JPMorgan Chase
to absorb Bear Stearns, started lending directly to securities
firms for the first time since the Great Depression and slashed
interest rates by 75 basis points to 2.25 percent.
Thanks to the Fed's efforts, the dollar climbed 1.5 percent
on the week against the basket of major currencies to around
72.75 <.DXY>.
The dollar posted its biggest gain against the euro since
mid-December on Thursday as oil prices briefly dipped below $100
barrel for the first time in two weeks and gold dropped to a
one-month low. []
The euro edged up around 0.1 percent to $1.5445 <EUR=> from
late U.S. trading on Thursday, but well off a record high of
$1.5905 struck on electronic trading platform EBS on Monday.
The dollar on Friday rose around 0.3 percent against the yen
to 99.65 yen <JPY=>, hovering above a 12-1/2-year low of 95.77
yen hit on EBS on Monday. On the week, the U.S. currency climbed
0.6 percent.
The dollar was up 0.1 percent on the day at 1.0087 Swiss
franc <CHF=>.
"The fact that there is a credit crunch has not changed, nor
have conditions in the U.S. housing market. The dollar may find
it hard to rise further," said a trader for a Japanese trust
bank.
The dollar had tumbled after JPMorgan's sudden acquisition of
Bear Stears stoked fears that other major financial firms could
fall victim to the widening credit crisis that has damaged
markets once considered relatively safe.
The dollar has since trimmed its losses, due partly to
better-than-expected quarterly earnings at top U.S. investment
banks, and news that home financing companies Fannie Mae and
Freddie Mac won regulatory approval to pump $200 billion more
into troubled U.S. mortgage markets.
But doubts lingered about the outlook for the dollar, which
has been dented by the Fed's sharp cuts that have taken overnight
rates to their lowest in three years.
"Even if there are temporary moves to buy back the dollar ...
I think it will be hard to change the trend," said Masafumi
Yamamoto, head of FX strategy Japan at the Royal Bank of
Scotland, adding that the dollar could fall again next week if
U.S. economic data comes in weak.
(Additional reporting by Masayuki Kitano; editing by Gary
Crosse)
