July 11, 2014 / 1:35 PM / 3 years ago

FOREX-Yen stabilizes as market fears about Portugal ebb

* Yen stable against dollar after Thursday rally

* Yellen testimony on Tuesday in focus (Adds U.S. dollar moves, changes dateline from LONDON)

By Karen Brettell

NEW YORK, July 11 (Reuters) - The Japanese yen was stable against the U.S. dollar, after jumping on Thursday as Portugal’s largest bank sought to reassure investors about its financial stability.

Banco Espirito Santo said on Thursday night that loan losses to the troubled empire of its founding family would not put the bank at risk of running short of capital.

That eased some concerns. The yen rose to five-month highs against the euro and almost two-month highs against the dollar on Thursday as investors worried about contagion and sought out safe haven investments.

“It put concerns in the market about European growth and the bank sector,” said Mark McCormick, a macro strategist at Credit Agricole in New York. “A lot of the concerns were idiosyncratic.”

The yen was steady against the dollar at 101.33. It rose 0.12 percent to 137.72 against the euro.

The dollar was also little changed against the euro at $1.3593. The greenback rose 0.08 percent against a broad basket of currencies to 80.197, according to the dollar index .

The dollar has been largely rangebound against the major currencies in recent months, struggling to gain strength as the Federal Reserve maintains a steady, dovish tone and looks for further growth before indicating an interest rate hike is on the horizon.

Minutes from the U.S. central bank’s June meeting, released on Wednesday, offered no new insight into Fed policy. The next focus will be testimony by Fed Chair Janet Yellen to Congress on Tuesday.

With the Fed and the European Central Bank seen as unlikely to announce any shifts in policy in the near term, investors continue to seek out higher-yielding investments in alternative countries.

“The theme is really short the dollar, short the euro and a lot of carry, especially in emerging markets and higher-yielding G10,” said McCormick.

Philadelphia Fed President Charles Plosser, Chicago Fed President Charles Evans and Atlanta Fed President Dennis Lockhart will all speak on panels at an economic summit in Jackson Hole, Wyoming, on Friday. (Editing by Lisa Von Ahn)

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