Dollar firms against yen in Asia

TOKYO (AFP) - The dollar clawed back more ground against the yen in Asian trade on Tuesday as a recent rebound in global share prices brought a lull in the unwinding of risky trades, dealers said.

The yen shot higher last week as "carry traders" -- who had previously sold the yen heavily to buy high-yielding currencies -- beat a hasty retreat.

But with global markets showing signs of stabilising after the US Federal Reserve cut the lending rate it charges commercial banks on Friday, risk aversion has receded somewhat, dealers said.

The dollar rose to 115.10 yen in late morning trade in Tokyo, up from 114.86 yen in New York late Monday.

The euro was flat at 1.3473 dollars while rising to 155.10 yen from 154.80.

"Stock prices have rebounded after the Fed move last week and (market players) are waiting to see how things will develop next," said Nobuaki Tani, currency analyst at Resona Bank.

As investors have not finished assessing whether the Fed's action would be enough to restore confidence in US credit markets, "there still is the possibility" of another round of market turbulence, he added.

The dollar's topside was capped partly by selling by Japanese exporters, Tani said.

World financial markets had been roiled since early August by mounting concerns over the economic fallout from the weak subprime, or high-risk, home loan market in the United States.

The US Federal Reserve on Friday cut its discount rate it charges commercial banks by a half-point to 5.75 percent, raising expectations it may also lower its key federal funds rate, the overnight rate banks charge each other.

Japanese Finance Minister Koji Omi told reporters he agreed with US Treasury Secretary Henry Paulson by telephone to monitor the financial markets closely.

Omi also said the overall market situation appeared to be calming down.

"We still cannot say the situation is completely resolved, but it has been stabilising for a while," he told reporters.

NAB Capital Markets currency strategists said the fallout of the subprime loan problems on the global economy still needed to be monitored.

"It's too early to say whether the Fed's 50 basis points discount rate reduction alone will improve credit markets sufficiently to prevent a significant knock to economic activity," they wrote in a research note.