TOKYO (Thomson Financial) - The US dollar dipped against the yen in late morning trade in Asia Tuesday after hitting a near two-month high overnight as news that Merrill Lynch & Co will receive up to 6.2 billion dollars in fresh funds from two investment groups helped ease worries about US banks which had been battered by the credit turmoil.
The dollar rose to 114.35 yen in New York Monday, the highest level seen since Nov 7. The pair has gained 6.7 percent since hitting a 2 1/2-year low of 107.20 yen in intraday trading on Nov 26.
Merrill Lynch now joins a number of other global banks -- including Citigroup Inc, UBS AG, and Morgan Stanley -- which have managed to secure fresh capital to deal with losses stemming from bad bets in subprime mortgages.
Merrill said it was receiving the cash from Singapore's government-controlled investment fund, Temasek Holdings, and US-based money manager Davis Selected Advisors. The proceeds were expected to cushion Merrill's mortgage-related writedowns for the fourth quarter which some analysts say may reach 10 billion dollars.
The largest brokerage in the United States also said it would sell most of its commercial finance unit to GE Capital. Terms of the deal weren't made public.
'The concerted liquidity injection by the US, European Central Bank, and other central banks, together with the recapitalisation plans by private financial institutions helped revive appetite for the dollar,' Societe Generale Asset Management senior economist Akio Yoshino said.
'But investors have not recovered the appetite for risky assets amid lingering concerns about the subprime crisis, which may resurface depending on the quarterly results of US banks,' he said.
US banks like Citigroup will report their quarterly results in January.
The dollar's gains were also capped by selling by Japanese exporters seeking to hedge their exports.
According to the latest Tankan survey by the Bank of Japan released earlier this month, Japanese companies assume that the dollar will average 113.79 yen in the second half to March 2008 compared to the 114.33 yen they had projected in the September poll.
'Given selling by Japanese exporters and lingering concerns about the subprime issue, the dollar may struggle in reclaiming the 115 yen level,' Yoshino said.
Tokyo 12.00 pm (0300 GMT)
US dollar
yen 114.02
sfr 1.1579
Euro
usd 1.4390
yen 164.12
sfr 1.6666
stg 0.7282
Sterling
usd 1.9761
yen 225.30
sfr 2.2881
Australian dollar
usd 0.8701
stg 0.4401
yen 99.22
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