The dollar steadied on Tuesday a day after sliding from a one-month high against the yen on jitters that bank losses and more troubles in the finance sector could further hurt the weakening U.S. economy.

The dollar fell the previous day after a Merrill Lynch analyst said Lehman Brothers Holdings <LEH.N> may post a loss in the third quarter and take an additional $2.5 billion write-down on home loans for the period.

The comments, coupled with news that regulators seized two small U.S. banks on Friday, helped trigger a slide in stocks.

Adding to the bearish sentiment for the dollar, Merrill Lynch also said on Monday that it would take a $5.7 billion third-quarter write-down as it unloads huge amounts of risky debt, and raise $8.5 billion by selling new stocks. [ID:nN28254377]

But the U.S. currency found at least a temporary floor in early Asian trade, as investors were hesitant to sell the dollar after a string of data in the past week showed the euro zone economy was also losing momentum.

“Investors have turned bearish about the dollar again,” said a forex trader at a Japanese trust bank.

“But at the same time, recent weak euro zone data, as well as oil’s retreat from record peaks are preventing investors from selling the dollar aggressively,” the trader said.

The dollar was little changed from late U.S. trade on Monday at 107.42 yen <JPY=>, having fallen from a one-month peak of 108.08 yen hit on trading platform EBS the previous day.

The euro barely moved against the dollar at $1.5745 <EUR=>.

The European single currency rose against the dollar on Monday, undented by a report showing German consumer sentiment hit a five-year low, as the market was more worried about systemic risk in the U.S. financial system.

But in the near term, rising concerns about the slow euro zone economy will keep the euro from rising towards a record high struck above $1.60 earlier this month, analysts said.

The euro edged down 0.1 percent to 169.00 yen <EURJPY=R>, staying below an all-time high of 169.97 yen hit on EBS last week.

Traders said they expect the dollar to stay rangebound against the euro and the yen in the short-term as investors await several important U.S. economic reports later this week that will give clues on future monetary policy by the Federal Reserve.

Second-quarter U.S. GDP on Thursday and Friday’s U.S. jobs figures will be the market’s main focuses. But investors will also look to data on housing and consumer confidence later in the day.

The U.S. Treasury and the nation’s four biggest banks on Monday unveiled a plan to kick-start a market for an investment product to support home financing in the latest effort to spur a slumping housing market. [ID:nN28502941]

But the currency market showed muted reaction.

Source: http://www.afxnews.com

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