Dollar under pressure on US economy fears

TOKYO: The dollar was under pressure in Asian trade Friday on widening fears of a global slowdown, despite speculation Japan may step into markets again and buy the greenback to temper the soaring yen.

The dollar traded at 78.67 yen, down from 78.93 yen in New York, a day after Japan intervened in forex markets to stem the yen's rise as it approached a record high.

The euro, itself under pressure because of widening European debt woes, bought $1.4103 and 110.96 yen, after $1.4106 and 111.10 yen in New York.

The dollar might slip further in Asia, weighed by broad risk-aversion following a steep selloff in US stocks caused by renewed fears about a slowdown in the US economy and the eurozone debt crisis, dealers said.

Wall Street's Dow Jones Industrial Average plunged 4.3 percent, its worst one-day drop since December 2008, while the broader S&P 500 lost 4.8 percent, in a dive followed by sharp falls on Asian markets on Friday.

The focus of forex traders was whether Japan would intervene again, which "would send a surprise," a senior dealer at a major Japanese trust bank told Dow Jones Newswires, predicting a rate of 78.50 during Asian trade.

Japan's intervention on Thursday came in tandem with monetary easing by the Bank of Japan to tame a relentless rise in the yen, which hurts the country's exporters and puts at risk the recovery from the March 11 quake-tsunami.

Finance Minister Yoshihiko Noda on Friday told reporters that he was continuing to watch financial markets closely. But he also said he would spend some time assessing the effect of Thursday's action.

Meanwhile, Minister of State for Economic and Fiscal Policy Kaoru Yosano suggested more market action may follow, saying "it would be too hasty to think Thursday's intervention was a one-off measure".

Japan's unilateral currency intervention was the largest ever for a single day at up to four trillion yen ($50 billion), financial media reports said Friday, citing estimates by traders.

The intervention, plus a liquidity injection by Japan's central bank, on the day helped weaken the unit by about three yen to close to 80 yen against the dollar.

Copyright AFP (Agence France-Presse), 2011