Dollar nudges higher against yen in Asia

TOKYO, Japan -- The dollar rose slightly against the yen in Asian trade Wednesday, propped up by a drop in oil prices and renewed speculation about possible US interest rate rises, dealers said.

The US currency was at 107.35 yen in Tokyo morning trade after 107.25 in New York late Tuesday.

The euro was steady at $1.5782 against $1.5781 while rising to 169.47 yen from 169.27.

"A fall in oil prices is the main reason for the stronger dollar, along with hawkish comments by the Philadelphia Fed," said Kanako Oikawa, a currency strategist at Traders Securities.

Philadelphia Federal Reserve president Charles Plosser warned in a speech that a hike in US interest rates was unavoidable in the short-term in the face of inflation pressures.

While Plosser is seen as one of the most hawkish members of the Fed's rate-setting committee, his remarks rekindled speculation about possible US rate hikes that could boost the dollar, dealers said.

Investors generally prefer currencies offering higher yields.

US stocks staged a late rally Tuesday on easing worries about high energy costs and renewed interest in the battered financial sector.

The dollar also found support from US Treasury Secretary Henry Paulson, who reiterated Washington's preference for a strong currency and renewed his backing for troubled US mortgage finance giants Fannie Mae and Freddie Mac.

But worries about the health of the US economy have not been completely erased and whether the dollar can rise above 108 yen depends on movements in stock markets and oil prices, Oikawa said.