The dollar rose against the euro today after sliding to a record low the previous day, with a sharp drop in oil prices helping to temporarily offset mounting gloom over the US financial sector.
Investors battered the dollar to a record low against the euro the previous day as fears reached fever pitch after the US government was forced to come up with a rescue plan for mortgage lending giants Fannie Mae and Freddie Mac just as one of the country's biggest mortgage banks collapsed.
In addition, Federal Reserve Chairman Ben Bernanke did the dollar no favours when he said that restoring stability to the hard-hit financial sector was his top priority, suggesting that any potential interest rate hikes to contain inflation won't be coming soon.
But the dollar came off its lows against the euro and the yen as crude oil's biggest price plunge since the 1991 Gulf War briefly shifted investors' attention away from troubles in the US financial sector and economy.
Oil was little changed in Asian trade at just below $139 a barrel.
The euro fell 0.2 per cent from late US trade to $1.5886 having pulled back from a record high of $1.6040 hit on trading platform EBS the previous day.
The dollar eased 0.1 per cent to 104.51 yen up from a six-week low of 104.16 yen struck on Tuesday as it plummeted 1.5 per cent - the biggest one-day tumble since the collapse of Bear Stearns on March 17th.
Traders said the dollar's slide below the 105 yen threshold was a key psychological break that could prompt speculators to try to push it even lower. But currency day-traders in Japan saw the dollar's drop below 105 yen as a buying opportunity.
Data from the Tokyo Financial Exchange showed traders boosted their dollar-long positives by the second biggest one-day amount in records going back to mid-2006.
Reuters