* Concerns over U.S. financial sector rule market
* Dollar losses limited on euro zone economy worries
* U.S. data awaited on house prices, consumer confidence
* Japan mutual funds seen buying Aussie
By Rika Otsuka
TOKYO, July 29 (Reuters) - The dollar steadied on Tuesday a
day after sliding from a one-month high against the yen on
jitters that bank losses and more troubles in the financial
sector could further undermine the weakening U.S. economy.
Highlighting the ongoing damage from the year-old credit
crisis, Merrill Lynch <MER.N> said late on Monday that it would
take a $5.7 billion third-quarter write-down and raise $8.5
billion by selling shares. []
The dollar had fallen the previous day on a report that
Lehman Brothers <LEH.N> may post a loss in the third quarter and
take an additional $2.5 billion write-down on home loans, just
after U.S. regulators seized two small U.S. banks late last week.
But the U.S. currency managed to hold in Asian trade, as the
euro struggled to rise after a string of data in the past week
showed the euro zone economy was also losing momentum.
"Investors have turned bearish about the dollar again," said
a forex trader at a Japanese trust bank.
"But at the same time, recent weak euro zone data, as well as
oil's retreat from record peaks are preventing investors from
selling the dollar aggressively," the trader said.
The dollar was little changed from late U.S. trade at 107.39
yen <JPY=>, having fallen from a one-month peak of 108.08 yen hit
on trading platform EBS the previous day.
The euro barely moved against the dollar at $1.5744 <EUR=>.
The latest jitters about the troubles gripping the U.S.
financial system overshadowed data showing German consumer
sentiment hit a five-year low.
In the near term, however, concerns about a slowing euro zone
economy will keep the euro from rising towards a record high of
$1.6040 reached earlier this month, analysts said.
The euro barely budged at 169.05 yen <EURJPY=R>, staying
below an all-time high of 169.97 yen hit on EBS last week.
"The European economy is too patchy for investors to chase
the euro higher," said Tsutomu Soma, a senior manager of foreign
assets at Okasan Securities. "Few want to pile up long euro
positions now as many players are leaving the market soon for
holidays."
Concern that the fallout from the U.S. credit crisis is
spreading to Europe, Australia and New Zealand is also making
investors cautious about picking up high-yielding currencies,
traders said.
On Monday, Australia and New Zealand Banking Group <ANZ.AX>
joined National Australia Bank <NAB.AX> in disclosing increased
losses from exposure to distressed credit markets. []
The Australian dollar was up 0.1 percent at $0.9579 <AUD=D4>
but has pulled back from a 25-year peak of $0.9851 hit in
mid-July on the Reuters dealing system.
Against the yen, the Australian dollar held steady at 102.86
yen <AUDJPY=R>, supported by Aussie buying from Japanese mutual
funds as summer bonus money from Japanese household investors
flows into investment trusts, traders said.
Traders said they expect the dollar to stay stuck in ranges
against the euro and the yen in the short-term as investors await
several important U.S. economic reports later this week for clues
on the Federal Reserve policy outlook.
Second-quarter U.S. GDP on Thursday and Friday's U.S. jobs
figures will be the market's main focuses. Investors will also
look to data on housing and consumer confidence later in the day.
The U.S. Treasury and the nation's four biggest banks on
Monday unveiled a plan to kick-start a market for an investment
product to support home financing in the latest effort to spur a
slumping housing market. []
(Editing by Sophie Hardach)
