Wednesday October 15, 2008 - 11:03:20 GMT
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Reuters - www.reuters.com
FOREX NEWS-Euro, dollar slide vs yen, market wary of risk
* Euro, dollar slide vs yen, weak stocks stoke risk aversion
* Initial eurphoria from global bank rescue plans wears off
* Focus shifts to impact of bailouts on global economy
(Adds comment, updates throughout)
By Naomi Tajitsu
LONDON, Oct 15 (Reuters) - The euro and the dollar fell
against a broadly stronger yen on Wednesday as euphoria from
government plans to recapitalise hobbling banks ebbed and focus
turned to how the bailouts would impact the global economy.
Risk-wary investors flocked to the Japanese currency as a
near 3 percent fall in European shares underlined the
possibility that companies would continue to struggle through
the credit crisis, which would further weaken economies in the
euro zone and around the world.
"Governments have done as much as they can to deal with the
banking crisis. The fires have been put out for now, so panic
buying in the yen that we saw last week has subsided," said
Kikuko Takeda, senior currency economist at BTM UFJ.
"But with European shares falling today, it's not surprising
that yen support is continuing," she said, adding that more bad
news about the banking sector would be seen as a cue to buy yen.
The low-yielding yen has rallied dramatically as the crisis
in the banking sector prompted a frenzied unwinding in risky
carry trades, which used the currency to pick up assets in
Governments around the world have announced plans to rescue
their banking sectors and kick-start interbank lending, with the
United States on Tuesday saying it would inject $250 billion
into its banks, including the nation's top nine lenders.
The dollar <JPY=> fell 1 percent to 101.11 yen by 1004 GMT,
retreating further from around 103 yen hit on Tuesday and
keeping the pair within range of 97.88 yen hit according to
Reuters data last week for its first time since mid-March.
The dollar stayed weak after Federal Reserve Bank of San
Francisco Janet Yellen on Tuesday said the economy "appears to
be in a recession" [ID:nN14265967].
A raft of economic figures due later in the day may support
that view. The Federal Reserve will release its Beige Book
summary of economic conditions at 1800 GMT. Before that sees the
New York Fed's manufacturing poll for October, as well as
figures for retail sales and wholesale prices.
The euro <EURJPY=R> fell also fell a full percent to 137.75
yen, as a 2.8 percent slide in European shares kept
investors keen on getting out on risky trades.
The euro <EUR=> was largely unchanged at $1.3626, Earlier in
the day, it hit a session low of $1.3537 after a German poll on
Tuesday showing weak economic sentiment offered more evidence of
weakness in the euro zone economy.
Figures on Wednesday showed that slowing growth in energy
and food prices helped to curb inflation in the region in
September, which was seen keeping intact the possibility of more
euro zone interest rate cuts [nLF726507].
Traders said extreme fears about the financial crisis
receded after short-term interest rates for dollars eased in
response to the U.S. bank bailout announcement, which followed
similar pledges in Britain, France and Germany.
But analysts said that the possibility of the bailouts
taking a serious toll on economies around the world may keep
currencies like the dollar, euro and sterling struggling.
"The focus is returning to how much Libor rates will come
down and how this will support sentiment, and the market will
also refocus on fundamentals of where growth is going, the
extent of risks to global growth as well as U.S. growth," said
Divyang Shah, chief strategist at CBA.
The Canadian dollar <CAD=> inched up against the U.S. dollar
after Canadian Prime Minister Stephen Harper was re-elected and
strengthened his minority government on Tuesday [nN13406994].
The U.S. dollar fell as low as C$1.1539 <CAD=D4>, off a high
of C$1.1688 hit earlier in the day, and down from a three-year
peak of C$1.2135 struck on Friday.
(Editing by Victoria Main)
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