Dollar steady after Wall Street rebound

TOKYO (AFP) - The dollar was steady in Asian trade Tuesday, supported by an overnight rally on Wall Street after recent losses sparked by worries about the US housing market, dealers said.

The dollar was at 118.98 yen in Tokyo morning trade, little changed from 119.03 in New York late Monday.

The euro firmed to 1.3710 dollars from 1.3697 and to 163.13 yen from 163.05.

The dollar pushed back the yen in US trade overnight after a rebound on Wall Street renewed speculators' appetite for selling the yen in exchange for higher yielding currencies, dealers said.

Recent losses in US share prices had led investors to scale back this "carry trade" as they grew more risk averse due to worries about the impact on the US economy of the sub-prime mortgage problems, they added.

"The sub-prime concern is quite deeply rooted," said Saburo Matsumoto, chief forex strategist at Sumitomo Trust Bank.

"Excess liquity and funds were moved into the US housing market at a time when interest rates were low. Now what had been under the surface will start coming out," said Matsumoto.

Wall Street shares rebounded Monday as investors managed to set aside jitters about growing signs of trouble in the US housing market, with the Dow Jones index up 0.70 percent by the close.

"The gain in US equities served to reverse carry trade unwinding," NAB Capital strategist John Kyriakopoulos wrote in a note to clients.
Investors will be paying attention to US economic indicators this week including Friday's key monthly employment report.

Japanese jobless figures had little impact despite the unemployment rate dropping to 3.7 percent in June -- the lowest level in more than nine years -- from 3.8 percent in May.

The market was also watching political developments in Japan after a weekend election setback to the government that prompted some analysts to speculate that the central bank may delay an interest rate rise.

But Matsumoto said he still expected the Bank of Japan to raise its benchmark interest rate in August from 0.5 percent.