Dollar holds on to gains amid risk aversion

TOKYO: The dollar held on to gains against the euro and yen in Asia Wednesday as risk aversion gripped markets due to escalating turmoil in the Middle East and North Africa, sending oil prices higher.

The greenback was slightly higher at 81.92 yen in Tokyo afternoon trade against 81.84 in New York late Tuesday.

The euro fetched $1.3752, compared with 1.3774. The single currency eased to 112.66 yen from 112.71.

Deepening turmoil in the Middle East and North Africa weighed on currencies perceived to be riskier, prompting demand for so-called safe havens such as the yen and the dollar.

"Investors cannot make definitive moves amid the Middle East situation," said Gen Kawabe, dealer at Chuo Mitsui Trust and Banking.

"The market has been moving in line with oil prices."

New York's benchmark crude oil futures contract shot back above $100 a barrel in Asia Wednesday as unrest in the Middle East and North Africa continued to rattle markets.

Iranian security forces in Tehran fired tear gas Tuesday at anti-government protesters demanding the release of two opposition leaders they say have been jailed, opposition websites reported.

The soaring oil prices sent global stock markets lower.

With much of the global economy still ailing from the financial crisis, many fear sharply higher oil prices could smother the recovery and send many nations spiralling back into recession.

The dollar firmed Tuesday as Federal Reserve Chairman Ben Bernanke's warnings on high oil prices were seen as the bank taking a slightly tougher stance on inflation.

The greenback rose after Bernanke warned sustained high oil prices would damage the economy, even if current high commodity prices would only spell temporary and limited US price increases.

Investors are awaiting the second day of congressional testimony by Bernanke later Wednesday, after he offered a cautiously optimistic economic outlook on Tuesday, dealers said.

Shuichi Kanehira, a senior dealer at Mizuho Corporate Bank, told Dow Jones Newswires: "Now that Bernanke's testimony is already factored in, barring any surprises, the (dollar-yen) pair is likely to suffer on any further rises in oil prices or weakness in equities today."

The market is also awaiting the European Central Bank's policy meeting on Thursday and US payrolls data on Friday, dealers said.

Expectations that the eurozone's interest rate hikes will outpace the Fed's monetary tightening have driven gains by the euro against the dollar.

On Tuesday, preliminary data showed eurozone inflation rose to a 28-month high of 2.4 percent in February, increasing pressure on the ECB to tighten monetary policy.

The greenback was mixed against other Asian currencies.

It rose to Sg$1.2728 from Sg$1.2707 on Tuesday, to Tw$29.63 from Tw$29.60, to 1,127.63 Korean won from 1,123.66, and to 43.60 Philippine pesos from 43.50.

But the unit fell to 30.54 Thai baht from 30.59 and it was unchanged at 8,821.50 Indonesian rupiah.