Dollar steady after Greenspan warning on China

TOKYO (AFP) - The Philippine peso was stronger against the US dollar even as it steadied in Asian trade Thursday, to 46.02 Philippine pesos from 46.35.

The market had earlier digested a warning by former Federal Reserve chief Alan Greenspan of a possible sharp correction in Chinese shares, dealers said.

The dollar was almost flat at 121.62 yen in Tokyo afternoon trade, down slightly from 121.66 in New York late Wednesday.

The euro was steady at 1.3456 dollars after 1.3459 but slipped to 163.59 yen from 163.75.

Financial markets were nervous after reports of Greenspan's warning of a possible "dramatic contraction" in Chinese share prices, whose recent gains he said were "unsustainable."

Chinese regulators also issued a fresh plea to securities houses to warn retail investors to act prudently, weighing on Chinese stocks in morning trade.

"Although we don't expect shares to plunge, we are still concerned of what might follow in the coming weeks," said Yoshifumi Suzuki, forex dealer at Hachijuni Bank in Tokyo.

China meanwhile assured the United States at the end of high-level talks Wednesday that it would allow greater flexibility of its yuan currency but the remarks had little impact on the market, dealers said.

Investors are concerned about a possible repeat of the global market turmoil seen in February which began with a stock market sell-off in China that prompted speculators to reverse so-called carry trades funded with cheap Japanese yen, dealers said.

That rout -- which triggered a fall in the dollar as investors scaled back risker investments -- was blamed partly on a warning from Greenspan about US economic growth.

"The sudden plunge in global markets caused the yen carry trade to unwind rapidly. Investors are worried this could happen again and so we are very attentive," Suzuki said.

"If Chinese shares fall, this could pull down Japanese shares and could influence the unwinding of the yen carry trade," he added.

In a week thin on the economic calendar, dealers were waiting for Friday's US housing data and Japanese consumer price index (CPI) which are expected to show a third straight monthly fall.

If the CPI is weaker-than-expected, "the market will be more convinced that the Bank of Japan will hold interest rates until after the Upper House election in July," argued Toru Umemoto, chief forex strategist at Barclays Capital.

The dollar slipped to 33.301 Taiwan dollars from 33.399, to 1.5252 Singapore dollars from 1.5298, to 931.10 South Korean won from 931.40, and to 8,705 Indonesian rupiah from 8,748.

The greenback was steady at 32.66 Thai baht.