US dollar slips as optimism fades on bank asset plan

* Business


* US dollar slips as optimism fades on bank asset plan
* Sterling slides on failed gilt auction, retails sales
* U.S. durable goods better than expected
(Recasts, adds comment, updates prices, changes byline, changes dateline, previous LONDON)
By Nick Olivari
NEW YORK, March 24 (Reuters) - The U.S. dollar slipped against major currencies on Wednesday, despite a jump in U.S. durable goods orders, as investors continued to assess whether the U.S. plan to remove non-performing assets from banks was enough to revive the financial system.
Investors were at first euphoric when more details of the bank plan were released on Monday by the U.S. Treasury Department in the wake of news last week that the Federal Reserve would to buy U.S. Treasury debt.
But investors can also see a downside to a Federal authority buying government debt and are uncertain the Treasury's plans will work.
Better than expected U.S. durable goods orders for February were also limited the need for the U.S. dollar as a safe haven. [ID:nN24363179].
Sterling extended early broad losses to hit a session low versus the dollar after data showing that retail sales fell more sharply than expected in March and after a UK gilt auction failed for the first time since 2002.
"The market still wants to build short dollar positions right now and I think any better than expected news is likely to play into that theme," said Michael Woolfolk, senior currency strategist, Bank of New York Mellon in New York said of durable goods.
The euro rose 0.3 percent against the dollar to $1.3502 .
Investors will now be looking for more more details of the U.S. government plan to revive the economy when Treasury Secretary Timothy Geithner speaks before the Council on Foreign Relations in New York during the New York morning.
"Markets took a step back overnight from the euphoria that was generated after U.S. Treasury Secretary Geithner presented the latest US plans to purge banks' balance sheets of toxic assets on Monday," said the Saxo Bank strategy team in a note to clients.
POUND PUMMELLED
The pound fell after the Confederation of British Industries distributive trades survey balance fell to -44 in March from -25 in February. Analysts had expected a smaller deterioration to -35.
The failure to achieve a fully covered gilt auction, suggesting reduced demand for sterling assets, also weighed on the currency [ID:nLP456926].
Gilt strategists blamed the auction's failure on market uncertainty created by Bank of England Governor Mervyn King when he said on Tuesday that the BoE could scale back its programme of gilt purchases if they were especially successful in boosting the economy.
"The gilt auction was appalling and at the next BoE meeting they may have to extend the range of eligible maturities (for quantitative easing)," said Christian Lawrence, FX strategist at RBC Capital Markets in London.
The pound fell 0.7 percent to $1.4574, while the euro rose 1.1 percent to 92.66 pence.
The yen was supported by Japanese investors repatriating funds from overseas before the end of the financial year on March 31, traders said.
The dollar was last little changed against the yen at 97.78 yen , although the euro was 0.4 percent higher at 132.14 yen on electronic trading platform EBS .
Frankfurt-based Commerzbank currency strategist Ulrich Leuchtmann said although there were no fundamental reasons to buy the Japanese currency, there were concerns that its sharp falls seen in February had been overdone, he added.
In other news on Wednesday, Eurogroup head Jean-Claude Juncker said Europe is not prepared to boost spending beyond those stimulus measures it has already announced, even if pressured to do so by the U.S. [ID:nLP219078]. (Additional reporting by Kirsten Donovan in London and Wanfeng Zhou in New York) (Reporting by Nick Olivari; Editing by Theodore d'Afflisio) )