// TOKYO - The dollar was trapped in well-worn ranges on Tuesday as the market suffered a dearth of trading factors after digesting a fiasco at Freddie Mac, which fired its president over an accounting scandal.
The president and chief operating officer of the second-biggest U.S. mortgage finance firm was fired on Monday for not fully cooperating with the counsel to the audit committee reviewing its earnings statements from 2000 through 2002.
The company also replaced its chairman and its chief financial officer.
Nervousness crept into the market over how the Freddie Mac story would develop as Asian investors, including central banks and Japanese institutional investors, are believed to hold large volume of bonds issued by the company.
The issue had poured cold water on the dollar's brief recovery since Friday when key U.S. jobs data turned out better than expected.
The dollar fell as low as 117.97 yen on Tuesday but later recouped some losses.
At 1:44 a.m. EDT, the dollar was trading at 118.12/15 yen, almost unchanged from the late U.S. level of 118.14/22 yen. It fell to 117.80 yen in post-Asian trade on Monday.
"Many Japanese investors hold U.S. agency bonds but it's not having much impact on the currency market here," said Yuichi Ishibashi, director at Barclays Bank.
But some dealers said the Freddie Mac scandal has not petered out yet as Japanese investors holding large volumes of Freddie Mac bonds are faced with a dilemma.
"At this point, there is just no way to judge how serious the issue is. Investors have no choice but to take a wait-and-see stance until things are played out," said Yasunari Ueno, chief market economist at Mizuho Securities.
"Investors are facing a tough decision about what to do with the bonds, because they can't just shift their investment from agency bonds to U.S. Treasuries with yield levels so low."
The market will be closely watching whether Federal Reserve Chairman Alan Greenspan will touch on the issue when he testifies on natural gas supply and demand before the House Energy and Commerce Committee later on Tuesday.
Greenspan in late April said that Congress should keep a close eye on risks mortgage financiers Fannie Mae and Freddie Mac pose to the U.S. financial system.
U.S. Treasury Secretary John Snow also speaks later in the day at the Japan Society in New York.
Japan's top financial diplomat, Zembei Mizoguchi, said he had no comment on the impact of Freddie Mac's firings.
He also declined to say whether Tokyo had recently intervened in the currency market. The market speculates that Japan may have intervened last week when the dollar fell to a low of 117.30 yen. STERLING KEEPS WEAK TONE
Sterling recovered some lost ground but still remained under pressure against the yen suffering from losses caused by comments from Chancellor of the Excheckr Gordon Brown.
Brown said on Monday that Britain was not yet ready to join the euro zone but that a referendum could come in 2004.
In a decision that was widely flagged ahead of its publication, Brown said the UK economy had not converged sufficiently with the euro zone, but that next year a case could be made for euro entry.
The pound, which fell below 194 yen during Tokyo hours, was trading at 194.69/81 yen -- well above the late New York level of 194.47/57 yen. But it was still far from Monday's level of around 197 yen.
The pound was quoted at $1.6476/80 and 71.10/14 pence against the euro.
The euro was quoted at $1.1717/22 little changed from the late U.S. level of $1.1716/20.