TOKYO (Reuters) - The yen rose against the dollar on Monday, but stayed well below 13-year highs hit last week as a rally in Asian shares pointed to some recovery in risk appetite and curbed demand for the yen.
The yen rallied on Friday to as high as 88.10 yen per dollar on trading platform EBS, its highest since 1995, after the U.S. Senate rejected a rescue plan for U.S. automakers.
The Senate decision pummeled stock markets, stoked worries about a decline in risk appetite and gave a boost to the yen on Friday.
But the yen later fell back, partly because market players became mindful of risks that Japanese authorities could intervene to curb sharp rises in the yen.
The yen initially edged higher against the dollar on Monday, but pared its gains as Tokyo shares rallied .N225 after relief over a possible lifeline for the struggling U.S. auto industry lifted Wall Street.
"Share prices are all positive starting with Australian shares," said a trader for a European bank.
Equities are regarded as a barometer of investors' appetite for risky carry trades, in which investors sell low-yielding currencies like the yen to invest in higher-yielding currencies and assets.
The dollar dipped 0.2 percent against the yen to 90.90 yen, but was up from an intraday low of 90.49 yen hit earlier on trading platform EBS.
Higher-yielding currencies rose against the yen, with the euro rising 0.7 percent to 122.63 yen, and the Australian and New Zealand dollars rising against the yen as well.
The White House said on Friday it was considering tapping a $700 billion financial industry bailout fund to prevent a collapse of ailing U.S. automakers.
But U.S. President George W. Bush said on Monday an announcement on a auto industry rescue was not imminent, leaving the industry's fate clouded in uncertainty for a little longer.
Against the dollar, the single European currency rose to two-month highs near $1.3490.
Market players said the euro was drawing support in the wake of recent comments by European Central Bank policymakers that have cast some doubt on how soon and how aggressively the ECB may lower interest rates from current levels. European Central Bank Governing Council member Yves Mersch said on Friday the bank still had some room to cut interest rates but needed to use its main weapon against the recession wisely.
DOLLAR AND THE YEN
Analysts said there was still a risk of the dollar falling below Friday's 13-year low against the yen later this month.
