Dollar steadies in Asia after heavy losses

TOKYO: The dollar showed signs of stabilising in Asian trade on Wednesday after heavy losses sparked by worries about problems in the US financial system, dealers said.

The dollar edged up to 104.81 yen in Tokyo morning trade from 104.63 in New York late Tuesday.

The euro was little changed at 1.5908 dollars after 1.5903, hovering below its fresh all-time high of 1.6038 reached on Tuesday.

Markets were jittery that the troubles of US mortgage finance giants Fannie Mae and Freddie Mac could spread overseas as foreign investors have large exposure to US home loans, dealers said.

"Markets are increasingly worried that the US economic and financial turmoil could trigger a slowdown in Europe and even Japan," said Ryohei Muramatsu, treasury manager at Commerzbank.

Fannie Mae and Freddie Mac have a significant influence over global markets and economies, he noted, adding that Washington's recent measures to bolster the two mortgage giants had done little to boost market confidence.

Federal Reserve chairman Ben Bernanke said Tuesday the US banking system was "well capitalised" but expressed concerns about banks' ability to keep enough credit flowing to lift economic growth.

He told Congress the US economy continued to face "numerous difficulties." Meanwhile, Fannie Mae's and Freddie Mac's shares endured heavy losses again Tuesday.

"Markets are disappointed with the Fed and the (US) government because what seemed to be a bold action turned out to be not much at all," said Muramatsu. "The government should have acted a year ago."

Helping to contain the dollar's losses, a ZEW research institute survey of investor confidence in Germany showed a record low in July as high oil prices and a rising euro hit Europe's biggest economy.

The pound meanwhile held firm just above the 2.0-dollar level after British inflation jumped to a 16-year high of 3.8 percent in June due to hefty rises in food and fuel prices.

Dealers said the dollar could fall further as major US banks are expected to reveal fresh credit-related losses this week.