The New Nation - Internet Edition

AFP, Tokyo

The dollar rallied away from a two- year low against the yen in Asian trade on Tuesday as news of a big investment in Citigroup by the Abu Dhabi government eased credit market worries, dealers said.

They said the announcement that a United Arab Emirates investment fund will buy 4.9 percent of the US banking giant revived interest in risky "carry trades" that favour high- yielding currencies over low-return ones such as the yen.

The dollar jumped to 108.31 yen in Tokyo afternoon trade from 107.40 in New York late on Monday. The euro soared to 160.97 yen from 159.72 but was slightly weaker at 1.4863 dollars after 1.4872. The greenback had come under selling pressure in US trade after fresh worries about the fallout from the subprime loan crisis eroded earlier optimism about a busy start to the US holiday shopping season.

The sudden reversal on Wall Street "knocked investors off their feet," said Yosuke Hosokawa, head forex strategist at Chuo Mitsui Trust Bank.

But the greenback rebounded in late Tokyo trade, helped by news of the 7.5 billion dollar investment in Citigroup by the Abu Dhabi Investment Authority, which sparked a rally on the Japanese stock market, dealers said. They said the move helped to calm earlier jitters over British bank HSBC's announcement that it would spend 35 billion dollars to bail out two funds it manages.

But analysts warned that further tough times could lie ahead.

The market was looking to US existing home sales data due out Wednesday and new home sales figures set for Thursday for fresh clues on the extent of the US housing slump.

Market participants were also looking ahead to Wednesday's release of the Federal Reserve's Beige Book economic report for fresh leads on whether the US central bank will cut interest rates at its December 11 meeting, dealers said.

The dollar was mixed against Asian currencies. It fell to 1.4414 Singapore dollars from 1.4415 on Monday and to 42.78 Philippine pesos from 42.87, while holding steady at 31.18 Thai baht.

The greenback rose to 32.34 Taiwan dollars from 32.31, to 928.70 South Korean won from 927.90 and to 9,390 Indonesian rupiah from 9,371.