TOKYO: The dollar reversed early losses against the yen in Asia on Friday despite Moody's downgrade of 15 of the world's biggest financial firms and after the Federal Reserve held off huge stimulus measures.
The greenback bought 80.45 yen in afternoon trade, bouncing back after falling to 80.09 yen in the morning. It sat at 80.26 yen in New York late Thursday.
The euro rose to $1.2560 and 101.03 yen, from $1.2543 and 100.68 yen in US trade.
The US Federal Reserve said this week it would extend its Operation Twist -- selling short-term debt to buy longer term Treasuries -- for another six months and was “prepared to take further action” if needed.
It also slashed its growth forecasts for the year amid concerns over headwinds from Europe.
But the move disappointed dealers who had hoped for a fresh round of asset purchases, or quantitative easing, which would have flooded the market with dollars.
“Despite weak data and some other negative leads, the dollar's strength in the long run is unchanged,” said Hiroshi Sakurai, currency analyst at Mizuho Investors Securities.
“The US economy is not bad enough that everyone can bet the Fed will take another round of monetary easing,” Sakurai added.
Analysts said traders adopted a risk-averse mood in response to the Moody's downgrade on Thursday of the credit ratings for 15 of the world's largest financial institutions including Goldman Sachs, Barclays, Citigroup, HSBC and Deutsche Bank, citing exposure risk and Europe's economic woes.
Currency markets were also looking to a European Union finance ministers' meeting later Friday, dealers said, spurring hopes of further progress to contain the continent's fiscal woes.
The leaders of Germany, France, Italy and Spain are also due to meet in Rome to thrash out details of measures aimed at tackling the debt crisis before a crucial EU summit next week.
The International Monetary Fund on Thursday said the eurozone needs to establish a full banking union and that the European Central Bank should usher in further stimulus, warning the region's crisis was at a “critical stage.”
The dollar gained against other Asia-Pacific currencies.
It rose to Sg$1.2776 from Sg$1.2711 a day earlier, to 42.47 Philippine pesos from 42.28 pesos, to 56.86 Indian rupees from 56.44 rupees, and to 31.81 Thai baht from 31.65 baht.
The greenback strengthened to Tw$29.93 from Tw$29.84, to 1,157.50 South Korean won from 1,150.90 won, and to 9,500.00 Indonesian rupiah from 9,458.00 rupiah.
The Australian dollar bought US$1.0058 against US$1.0156 while the Chinese yuan changed hands at 12.62 yen, from 12.41 yen.