By Rika Otsuka
TOKYO, March 27 (Reuters) - The dollar edged up against the
euro and Swiss franc on Thursday after falling sharply this week
as a series of weak data stoked U.S. recession fears, supporting
expectations for a big Federal Reserve interest rate cut.
The yen trimmed gains against the dollar after rising broadly
in earlier trade as a drop in Asian stocks prompted investors to
unwind risky carry trades, in which the low-yielding Japanese
currency was used to finance the purchase of assets offering
higher returns elsewhere.
The dollar firmed against the euro as investor demand ahead
of the end of the first quarter helped buoyed the U.S. currency,
traders said.
Still, the dollar remained not far from a record low against
the euro after the European Central Bank president's remarks that
euro zone rates were at the right level cooled expectations for
an ECB rate cut in the near term.
Together with Wednesday's data showing an unexpected
improvement in business confidence in Germany and France,
Jean-Claude Trichet's comments prompted investors to focus on the
widening yield advantage in the euro over the dollar.
"The euro looks set to hit new record highs, but a bit of a
correction after sharp gains will probably be needed before it
jumps further," said Shuichi Kanehira, a senior trader in the
forex division at Mizuho Corporate Bank.
Investors are seen as comfortable with picking up the
European single currency as both the euro zone economy and German
exporters are weathering economic troubles in the United States.
The euro <EUR=> dipped 0.2 percent to $1.5810 from late U.S.
trade on Wednesday near $1.5845. The European single currency
struck an all-time peak of $1.5905 on electronic trading platform
EBS early last week.
The euro had surged 2.7 percent combined on Tuesday and
Wednesday, marking its biggest two-day rise against the dollar
since January 2001, when the Fed started slashing rates to
contain the last U.S. recession.
The dollar edged up 0.2 percent against the Swiss franc to
0.9905 franc <CHF=>.
Wednesday's dollar slide in New York followed surprisingly
weak U.S. durable goods orders.
The data fueled concerns that the world's biggest economy is
either in, or tipping toward, a recession, after U.S. reports
showed on Tuesday that consumer confidence hitting a five-year
low, while house prices fell further across much of the country.
The dollar had been recovering from record lows against the
euro and Swiss franc in the past week as investors booked profits
on the currency's slide ahead of the first quarter-end, while it
was also helped by the Fed's efforts to ease the credit crisis.
The U.S. central bank has slashed the benchmark fed funds
rate to 2.25 percent from 5.25 percent just over six months ago,
even as the ECB has kept rates steady at 4 percent.
U.S. short-term interest rate futures now indicate investors
see around a 40 percent chance of the Fed cutting interest rates
by 50 basis points in April. A 25-basis-point rate cut is fully
priced in. <FEDWATCH>
Against the yen, the dollar was nearly flat at 99.00 yen
<JPY=> after falling as low as 98.56 on EBS earlier in the
session. The U.S. currency hit a 13-year low of 95.77 yen on EBS
early last week.
The euro slid 0.4 percent to 156.30 yen <EURJPY=R>.
Tokyo's Nikkei share average <> ended down 0.8 percent
on the day. well above session lows.
(Additional reporting by Satomi Noguchi; editing by Gary Crosse)
