Dollar edges up but central banks action weighs

TOKYO: The greenback edged up in Asian trade Friday as traders adjusted their positions but an agreement among major central banks to provide dollar funding kept pressure on the US unit, dealers said.

The euro stood at $1.3848 and 106.31 yen in Tokyo Friday, off slightly from $1.3882 and 106.40 yen in New York Thursday.

But the European single currency, which stood at $1.3710 Thursday morning in Tokyo, maintained most of the gains made after the central banks' action.

The European Central Bank, along with its US, Japanese, Swiss and British counterparts, agreed to take concerted action to provide dollars to help their banking systems as Europe continues to struggle under the weight of debt.

The dollar bought 76.77 yen, slightly firmer than 76.66 in New York Thursday.

The dollar inched up on position adjustments ahead of a long weekend in Japan, but the central banks' action kept pressure on the unit, said Satoshi Tate, a senior dealer at Mizuho Corporate Bank.

"The liquidity operation should keep the dollar top-heavy for now," he told Dow Jones Newswires.

The market kept its focus on Europe as the region's financial ministers meet later in the day for the Economic and Financial Affairs Council (Ecofin), in which US Treasury Secretary Timothy Geithner is scheduled to take part.

"There is of course still caution over Europe," Tate said.

Japanese Finance Minister Jun Azumi said he will monitor the outcome of the meeting in Poland as well as how markets react to the central banks' action.

"I feel that the sense of urgency to do the utmost to prevent Greece's crisis from spreading is beginning to be shared" within Europe, Azumi told a regular press briefing.

Emma Lawson, National Australia Bank currency strategist, wrote in a report that the central banks' move eases the "strains" caused by recent increased demand for US dollars and a decrease in trust between banks.

"So while it does not remove the inherent problems in Greece (and the rest of the Euro area periphery), it does ease some of the secondary impacts, thus reducing the risks of a financial crisis on the anniversary of Lehman's collapse," she wrote.

Copyright AFP (Agence France-Presse), 2011