Dollar stable versus euro, yen

The dollar steadied in European trading on Tuesday as worries about resurgent oil prices offset relief that major US banks' earnings were not so bad as feared, dealers said.

Attention was also being given to the latest US house price index due Tuesday, that was expected to show a continued decline, they added.

In morning deals, the European single currency stood at 1.5921 dollars, unchanged from late on Monday in New York.

Against the Japanese currency, the dollar edged up to 106.45 yen from 106.41.

"For the dollar, the fortunes of the banking system remain critical to sentiment," said Calyon economist Daragh Maher.

The dollar had won a boost overnight after Bank of America posted a quarterly profit well above expectations, further soothing jitters about US financial woes after last week's smaller-than-expected loss at Citigroup.

But gains in the dollar were short-lived as oil prices, which plunged more than 16 dollars a barrel in New York last week, surged higher as a tropical storm barrelled through the Gulf of Mexico, threatening energy installations.

A week ago, worries about the US financial sector had sent the euro soaring to a historic peak of 1.6038 dollars.

The euro continued to be supported by the higher level of interest rates in the eurozone compared with those in the United States and Japan because investors generally prefer currencies offering better yields, dealers said.

Traders returning to work in Tokyo on Tuesday after Monday's public holiday in Japan meanwhile opted to wait for fresh leads after a rebound in oil prices counter-balanced easing concern about problems in the US financial sector.

"The direction of the dollar against the yen remains unclear," said Saburo Matsumoto, chief foreign exchange strategist at Sumitomo Trust Bank.

Dealers were also monitoring trading in the euro against the yen.

"We're interested in watching when the yen will hit a new low" beyond 170 per euro, said Matsumoto.

The pound steadied after coming under pressure a day earlier when Bank of England policy-maker David Blanchflower had warned that the British economy was heading into recession and that interest rates should fall to "well below" their current level of 5.0 percent.

In London morning trade on Tuesday, the euro changed hands at 1.5921 dollars against 1.5921 late on Monday, at 169.52 yen (169.42), 0.7947 pounds (0.7947) and 1.6187 Swiss francs (1.6206).

The dollar stood at 106.45 yen (106.41) and 1.0166 Swiss francs (1.0176).

The pound was at 2.0039 dollars (2.0032).

On the London Bullion Market, the price of gold increased to 972.93 dollars per ounce from 960.50 dollars late on Monday.