The dollar rose against other major currencies in Asian trade Monday but came off early highs after US lawmakers reached a consensus on an unprecedented bailout of Wall Street, dealers said. They said the euro was bogged down by fears that Europe's own financial system was in trouble.
The dollar firmed to 106.28 yen in Tokyo afternoon trade from 105.95 in New York late Friday, although the greenback gave up some early gains. The euro slipped to 1.4457 dollars from 1.4613 and 154.81 yen from 154.92.
The greenback "should receive a short-term boost" from the 700 billion dollar bailout outlined Sunday by US lawmakers, wrote NAB Capital strategist John Kyriakopoulos in a market note.
"Ultimately, the extent to which the bailout package eases bank funding pressures and reduces the risk of a global recession is key" for currencies trading against the dollar, he added. According to draft legislation, the government would be able to buy up troubled assets from banks, pension plans, local governments and other firms while allowing oversight and regulations.
It would also give taxpayers an ownership stake - meaning they would share in any future profits of participating companies - limit compensation for company executives and allow the government to help prevent home foreclosures. Traders said it remained unclear how effective the package will be in ending the US financial sector's woes.
"Many conditions were added to the bill and it's now unclear how many banks will be willing to ask for help," Yuji Saito, head of FX Group at Societe Generale, told Dow Jones Newswires. "Even if they used the system, how much relief they can get from this package remains questionable," he said.
The euro fell on concerns that major European banks are the next major victims of the US-bred credit crisis, dealers said. Belgium, the Netherlands and Luxembourg rode to the rescue Sunday of financial group Fortis with an 11.2 billion euro bailout.
The British government meanwhile said it was nationalising Bradford & Bingley after Spain's Santander took over its retail deposits and branch network. The market is now waiting for Friday's release of US jobs data for September.
The unemployment rate jumped to a five-year high of 6.1 percent in August. Another market focus is the European Central Bank's policy-setting meeting Thursday followed by remarks from ECB President Jean-Claude Trichet.
The dollar also gained ground against regional Asian currencies, rising to 1,188.10 South Korean won from 1,160.70 on Friday, to 1.4304 Singapore dollars from 1.4246, and to 9,445.00 Indonesian rupiah from 9,377.50. The dollar firmed to 32.12 Taiwan dollars from 32.03, to 46.84 Philippine pesos from 46.59 and to 34.01 Thai baht from 33.97.