The U.S. dollar regained some of the ground it lost in overnight Asian trading Friday as traders realized the greenback could have been oversold.

The euro slipped to $1.3426 from $1.3431 in New York late Thursday. The dollar rose to 104.15 yen, from $104.08 yen.

The forex market awaits the release of the data on the US January current account deficit that is expected to remain mostly steady, increasing slightly to $56.5 billion from $56.4 billion in December.

Remarks by Fed Chairman Alan Greenspan, who warned in New York that foreign governments may soon get tired of financing the US deficit, put downward pressure on the dollar.

But the most drastic impact was the remarks by Japanese Prime Minister Junichiro Koizumi to the nation’s parliamentarians about the necessity of diversification. Mr Koizumi said in his speech with regard to Japan’s massive foreign currency reserves: "I believe diversification is necessary."

Mastatsugu Asakawa, director of the foreign exchange division at the Ministry of Finance, was quick to point out that Mr Koizumi was talking mainly on asset-class diversification, not currency diversification.

"The prime minister’s response was very clear. He did not say anything about his intention to diversify our foreign reserves in terms of currency," said Mr Asakawa. "He said something in general - that, from a risk management perspective, obviously diversification is needed."