The dollar edged towards a seven-week high against the yen on Monday, as Citigroup's results fuelled hopes that the worst of the bank losses stemming from the US housing sector are out.
Citigroup, the largest US bank, on Friday reported a quarterly loss of $5.1 billion, but investors welcomed its aggressive steps to resolve credit problems and felt more confident about the financial sector.
Credit jitters were further soothed on efforts by Royal Bank of Scotland to shore up its balance sheet, with Britain's second-biggest bank expected to announce this week Europe's largest-ever rights issue of up to 12 billion pounds and over $10 billion of losses on toxic investments. The dollar edged up 0.2 percent on the day to 103.85 yen not far from a seven-week high of 104.66 yen hit on trading platform EBS on Friday.
The euro was steady at $1.5825 off a record high of $1.5985 hit on EBS last week. Many traders believe the euro is still on an upward trend on expectations that European interest rates will stand pat at 4.0 percent until later this year.
European Central Bank Governing Council member Klaus Liebscher told Reuters last week that there was no room to cut euro zone rates, adding that he would not rule out a tightening.
The Federal Reserve, meanwhile, is expected to cut rates further from the current 2.25 percent. More Fed rate cuts would help keep euro zone rates well above those in the United States, maintaining the euro's yield appeal.
The single European currency edged up 0.2 percent to 164.30 yen On Friday, the euro had risen as far as 164.68 yen on EBS, the highest since late December, as receding concerns about the financial sector and a rise in global stocks rekindled investor's risk appetite. The Nikkei share average was up 1.3 percent in late afternoon trade, tracking a rally late last week on Wall Street on reassuring US earnings reports.
The Australian dollar was supported after data showed a record jump in Australia's producer prices in the first quarter sparking suggestions that consumer prices could also prove higher than expected. The Aussie rose 0.7 percent to $0.9397.
Against the Japanese currency, the Aussie struck a fresh seven-week high of 97.65 yen, before trading at 97.50 yen, up 0.8 percent on the day on carry trades. In carry trades, market players use low-yielding currencies such as the yen to finance buying of assets offering higher returns elsewhere. Despite the dollar's hefty gains in the past few sessions, investors were not sure how long the currency's firmness thanks to easing credit fears will last.