Dollar edges up after falling on recession fears

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The yen trimmed gains against the dollar after rising broadly in earlier trade as a drop in Asian stocks prompted investors to unwind risky carry trades, in which the low-yielding Japanese currency was used to finance the purchase of assets offering higher returns elsewhere.

The dollar firmed against the euro as investor demand ahead of the end of the first quarter helped buoyed the U.S. currency, traders said.

Still, the dollar remained not far from a record low against the euro after the European Central Bank president's remarks that euro zone rates were at the right level cooled expectations for an ECB rate cut in the near term.

Together with Wednesday's data showing an unexpected improvement in business confidence in Germany and France, Jean-Claude Trichet's comments prompted investors to focus on the widening yield advantage in the euro over the dollar.

"The euro looks set to hit new record highs, but a bit of a correction after sharp gains will probably be needed before it jumps further," said Shuichi Kanehira, a senior trader in the forex division at Mizuho Corporate Bank.

Investors are seen as comfortable with picking up the European single currency as both the euro zone economy and German exporters are weathering economic troubles in the United States.

The euro dipped 0.2 percent to $1.5810 from late U.S. trade on Wednesday near $1.5845. The European single currency struck an all-time peak of $1.5905 on electronic trading platform EBS early last week.

The euro had surged 2.7 percent combined on Tuesday and Wednesday, marking its biggest two-day rise against the dollar since January 2001, when the Fed started slashing rates to contain the last U.S. recession.

The dollar edged up 0.2 percent against the Swiss franc to 0.9905 franc.

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