Dollar dips in Asia on profit taking

August 18, 2008

, TOKYO, August 18  – The dollar eased back in Asia Monday from recent highs against the euro and the yen as traders took profits from the currency\’s recent surge, while waiting for a fresh batch of economic data, dealers said.

The dollar briefly slipped below the key 110-yen level before rebounding to 110.21 by late morning in Tokyo, down from 110.48 in New York on Friday.

The euro rose to 1.4732 dollars, up from 1.4685 late Friday. The euro firmed to 162.32 yen from 162.27.

Investors sold the greenback to take profits on its recent rise while exporters bought yen to repatriate their overseas earnings, said Sumitomo Trust Bank chief forex strategist Saburo Matsumoto.

The dollar recently has risen to a six-month peak against the euro and to its highest level since January against the yen on worries that the fallout from the US financial crisis is spreading to other major economies.

Markets were looking ahead to the results of the ZEW survey of German business confidence due Tuesday, amid growing concerns about the health of the eurozone economies.

The dollar has been buoyed by growing speculation that the European Central Bank could begin cutting interest rates next year to boost the eurozone economy, which shrank by 0.2 percent in the second quarter.

"Sentiment towards European growth has been steadily deteriorating, putting downward pressure on the euro," said Matsumoto.

Players are now focused on whether the euro will test the psychologically important level of 1.45 dollars, he added.

Falling commodity prices and a rise in US industrial output in July gave an additional boost to the US currency, dealers said.

Fresh clues on the state of the troubled US property market may come on Tuesday from data on housing starts.

The Bank of Japan was due to start a two-day meeting on interest rates later Monday, with traders bracing for a more cautious assessment from the central bank on prospects for Asia\’s biggest economy.

With inflation at a decade-high and Japan\’s economy in a downturn, the Bank of Japan is expected to leave interest rates on hold at 0.5 percent for now.

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