TOKYO (Reuters) - The dollar sagged against the euro on Friday as safety buying of the currency eased with fears over the global financial sector slightly curbed.
But the dollar held steady against the yen in choppy trade as some investors remained concerned about a global recession despite a rebound in U.S. share prices, and sought the safety of the world's most liquid currency.
Price movements remained extremely volatile with poor liquidity, making it hard to find the dollar's near-term direction, traders said.
The dollar was steady against the yen at 101.51 yen after rebounding as high as 101.84 from an earlier low of 101.12 yen on trading platform EBS.
The euro edged up 0.4 percent to $1.3505, staying above a 1- year low of around $1.3257 hit a week ago.
"Safety buying of the dollar may have peaked for now," said Hideki Amikura, deputy general manager of forex at Nomura Trust Bank.
Analysts said global financial sector concerns, though still strong, have receded a little and helped buoy the euro.
"Fears about financial institutions going under have eased since the Group of Seven meeting last week as governments showed readiness to pump in public funds," said Takahide Nagasaki, chief forex strategist at Daiwa Securities SMBC.
"The easing of such fears is slowly reversing a previously seen flight to safety into such currencies as the yen," Nagasaki said.
The yen also fell against currencies such as the euro and the Australian dollar as Tokyo shares rebounded following a late surge in U.S. stocks on Thursday, easing investor risk aversion.
"The focus of the market is now shifting gradually to the weakness of the real economy," said Minoru Shioiri, chief manager of forex trading at Mitsubishi UFJ Securities.
"Market players are watching not only the performance of banks but also companies that feel the direct impact of the slowing economy," Shioiri said.
The troubled housing and credit markets are hurting the broader U.S. economy, requiring a policy response that includes direct outreach to homeowners, Boston Federal Reserve President Eric Rosengren said late on Thursday.
Rosengren's comments came after more dismal U.S. data on housing and business activity the previous day which added to fears about a more marked slowdown of the economy.
Against the yen, the euro climbed 0.3 percent to 137.08 yen.
The dollar had gained broadly in the last few months, partly because nervous investors shifted funds to highly liquid dollar instruments as the global financial crisis intensified, analysts said. The yen, perceived as a safe haven, had also gained when the crisis intensified.
The dollar index, which measures the dollar's value against a basket of six major currencies, dipped 0.1 percent to 82.161. .DXY The dollar index hit a peak of 83.191 a week ago, the highest since June 2007.
Japan's Nikkei share average .N225 tracked the rise in U.S. stocks, gaining 2 percent a day after its worst fall since the 1987 market crash.
Gains in Tokyo equities prompted investors to step back toward carry trades, in which the low-yielding yen is used to fund investment in higher-yielding currencies and assets.
Further falls in interbank loan rates amid more drastic steps by central banks to provide funds and to improve bank balance sheets have also provided relief to investors and a boost to the U.S. stock market, Amikura at Nomura Trust Bank said.
(Additional reporting by Shinichi Saoshiro; Editing by Michael Watson)
