* Dollar falls as U.S. bailout talks stall
* WaMu closure, largest U.S. bank failure, hurts dollar
* Dallas Fed Fisher says rate hikes less urgent in crisis
* NZ dollar jumps after Q2 GDP contracts less than expected
By Satomi Noguchi
TOKYO, Sept 26 (Reuters) - The dollar slid against the yen
and the euro on Friday as a deal to rescue the U.S. financial
system stalled, souring hopes for an imminent agreement to
resolve the banking crisis.
U.S. lawmakers had appeared close to a final agreement on
Thursday on a massive $700 billion bailout to save the financial
system, but things spun off course during an emergency White
House meeting between Congressional leaders with U.S. President
George W. Bush. []
Negotiations towards a Wall Street bailout fell into disarray
late on Thursday after Republican presidential candidate Sen.
John McCain backed a new plan differing markedly from the one
that has been under discussion. []
Congressional leaders said an agreement could take until the
weekend or longer, sending U.S. stock futures <SPc1> down sharply
in Asian trading, hurting the dollar.
"The dollar will weaken further against the yen if
uncertainty deepens over the bailout plan," said Hideki Hayashi,
chief economist at Shinko Securities.
"U.S. lawmakers could still reach an agreement this weekend.
But investors will be on tenterhooks until such a prospect
grows," Hayashi said.
News that Washington Mutual <WM.N> was closed by U.S.
authorities and its assets sold in America's biggest ever bank
failure also hurt sentiment towards the greenback.
The third-largest U.S. bank JPMorgan Chase & Co <JPM.N> said
it bought the deposits of Washington Mutual, which has seen its
stock price virtually wiped out because of massive amounts of bad
mortgages. []
The dollar fell 0.8 percent to 105.65 yen <JPY=>, but stayed
in a rough range of 105-108 yen this week.
Traders said selling came mostly from speculators who create
and close positions in the short term, while many investors
avoided big directional bets in recent volatile sessions.
"The market is not in a state where we can analyse economic
fundamental factors and create bets accordingly. Price movements
are too choppy," said Haruhisa Takagi, head of the forex spot
trading group at Sumitomo Mitsui Bank.
The euro rose 0.3 percent to $1.4655 <EUR=>. Against the yen,
the euro fell 0.6 percent to 154.78 yen <EURJPY=R>.
Traders said comments from Dallas Fed President Richard
Fisher also put downward pressure on the dollar. Fisher said on
Thursday the danger of a financial meltdown makes the need for
higher interest rates less urgent.
Fisher's comments came after data on Thursday painted a bleak
picture of the U.S. housing and labour markets, reinforcing
market participants' views that even a massive bank rescue may
not be enough to avert a recession.
The New Zealand dollar jumped 0.9 percent to $0.6865 after
data showed the economy contracted in the second quarter, but by
less than the market had forecast.
Still, the data confirmed New Zealand fell into recession for
the first time in more than a decade, backing expectations of
more interest rate cuts this year and undermining the kiwi's
strength in the longer term.
The market showed limited reaction to data showing Japan's
core annual consumer inflation stayed at a decade high of 2.4
percent in August, matching a market forecast. []
(Additional reporting by Rika Otsuka; Editing by Chris
Gallagher)
