TOKYO: The dollar firmed against the yen in Asian trade on Tuesday, supported by interest rate differentials between the United States and Japan, dealers said.

The dollar traded at 81.92 yen in Tokyo morning trading, up from 81.79 yen in New York late Monday.

The euro was marginally higher at $1.3805 compared to 1.3803. The unit rose to 113.11 yen from 112.85 yen.

Despite upheaval in Libya, the market has stabilised as US and Japanese stock markets score healthy gains and as a modest fall in world oil prices help boost sentiment towards the global economy, analysts said.

Crude prices on Tuesday were off highs seen last week as oil kingpin Saudi Arabia's pledge to ensure sufficient supplies partially eased investor worries, they added.

"Investors' eyes are turning from the situation in the Middle East and North Africa to the monetary policy gaps," between global central banks' divergent approaches to inflation, said Teppei Ino, analyst at the Bank of Tokyo-Mitsubishi UFJ.

The euro has been supported by lingering expectations for a near-term rate hike in the eurozone, while monetary policy tightening in the United States and Japan remains a distant prospect.

"In that sense, they are buying the euro for the dollar and the dollar for the yen," Ino said.

The European Central Bank will hold a policy meeting Thursday and ECB chief Jean-Claude Trichet is scheduled to speak after the meeting.

"The ECB is unlikely to raise rates at the upcoming meeting but will try to smooth the way for the move," Ino said. "The ECB's statement and Trichet's comments are therefore expected to have a hawkish tone."

The market is also looking ahead to US Federal Reserve Chairman Ben Bernanke's testimony to Congress Tuesday, amid concern about rising prices, dealers said.

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