Yen firm in Asian trade amid credit jitters

TOKYO (AFP) - The yen was slightly firmer in choppy Asian trade Thursday as investors kept a nervous watch on global credit markets and the fallout from the US housing market woes, dealers said.

The dollar slipped to 118.79 yen in Tokyo morning trade from 118.90 late Wednesday in New York.

The euro eased to 1.3657 dollars from 1.3666 and to 162.23 yen from 162.56.

Market players remained nervous about the problems in the US sub-prime mortgage sector and recent turmoil in global equity markets, dealers said.

"The market is taking its lead from overseas credit markets, reacting sharply to any bad news," said Hideaki Inoue, chief manager of forex trading at Mitsubishi UFJ Trust and Banking Corp.

A rebound in US shares Wednesday provided some comfort to jittery investors.

But Inoue said the foreign exchange market remained sensitive to reports of new casualties among hedge funds with exposure to the problem mortgages.

"Liquidity is extremely scarce so trading reacts to even minor news," he added.

News that US pending home sales jumped five percent in July, defying expectations for a drop, provided a modicum of support for the dollar, dealers said.

"It was the first month in four to record positive growth and provided a welcome break from the continued run of excruciatingly weak US housing data of late amid ongoing bad news on the sub-prime front," said Commonwealth Bank senior economist Michael Workman.

The yen had the upper hand against other major currencies in Asian trade as traders scaled down risky carry trades that involve selling the Japanese currency to buy higher-yielding currencies, they added.

Players were also waiting nervously for Friday's US employment report.

A survey released Wednesday by ADP Employment Services indicated the US economy only added 48,000 private sector jobs in July, less than half of the 100,000 new positions expected by the market.

Dealers also noted that the ADP report was not a particularly reliable guide to likely outcome of the official non-farm payrolls data.

Players were also waiting for a monetary policy decision from the European Central Bank which is expected to leave its key rate on hold at 4.0 percent.

The ECB will deliberate by phone as is customary during the summer holiday period and no subsequent press conference is planned.

But analysts expect the ECB to hint in its statement that a rate rise will come in September, rather than October.