FRANKFURT — The euro rose against the dollar Tuesday as investors weighed the Bank of Japan's decision to provide markets with more liquidity and looked forward to other central bank events later in the week.
The 16-nation euro bought $1.5050 in European morning trade, up from the $1.4993 late Monday in New York.
The dollar rose to 87.05 Japanese yen from 86.29, while the British pound rose to $1.6479 from $1.6424 late Monday in New York.
In an emergency meeting, Japan's central bank decided Tuesday to further ease monetary policy by providing the economy with cheap loans amid government pressure to respond to a surging yen and falling consumer prices.
The Bank of Japan voted unanimously to offer about 10 trillion yen ($115.8 billion) in short-term loans to commercial banks to boost liquidity. It also maintained its key interest rate at 0.1 percent.
The yen has climbed sharply in recent days, and the central bank was under fire to take action. It vowed to do its "utmost" to battle deflation and bolster growth.
On Friday, the dollar briefly fell below 85 yen, its lowest level since July 1995 as debt problems afflicting Dubai shook up the banking sector. Investors are also still monitoring the Dubai situation.
"At the end of an emergency meeting, the BoJ said it will provide three-month loans to commercial banks at 0.1 percent interest rate. Eligible collateral will include Japanese government bonds, commercial paper and corporate bonds," UniCredit said in a morning research note.
Investors are also looking ahead to a European Central Bank meeting and Federal Reserve Chairman Ben Bernanke's reappointment hearings scheduled later this week.
The ECB should give some clues how it will end the extraordinary measures it used to supply the economy with extra liquidity during the financial crisis. The ECB is expected to keep its interest rate at 1 percent, a record low.
"As long as risk aversion is the theme, any euro versus dollar breakout back above $1.5060 may be further frustrated. But buying on dips here is still favored, as long as key thresholds at $1.4845 and $1.4765 hold," UniCredit said.
