Thursday November 13, 2008 - 10:11:39 GMT
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Reuters - www.reuters.com
FOREX NEWS-Yen retreats but keeps firm tone; Germany in recession
* Yen falls vs dollar, euro as stock markets recover poise
* Structural risk aversion intact; Germany enters recession
* Sterling hits 6-1/2-year low vs dollar at $1.4807
* RBA intervenes to prop up sliding Aussie
(Recasts, changed dateline, byline, adds quotes, updates
prices PVS TOKYO)
By Veronica Brown
LONDON, Nov 13 (Reuters) - The yen fell against the dollar
and euro on Thursday with wary investors finding respite from
deleveraging as European shares steadied, but global economic
worries remained, keeping overall risk aversion intact.
Recession fears became a reality in Germany as gross
domestic product in the single currency zone's biggest economy
contracted by 0.5 percent, putting it in recession for the first
time in five years [nLC517415].
The dollar kept a firm tone, pushing the euro towards recent
lows and sterling to a 6-1/2 year trough further below $1.50.
Meanwhile, wariness toward risk battered the Australian
dollar <AUD=D4>, which fell to a two-week low of $0.6348 in late
New York trade the previous day, forcing the Australian central
bank to intervene and prop up the currency early on Thursday.
Analysts said that the dollar and yen's overall upward
trajectory should stay on track as the U.S. Treasury backed away
from using its $700 billion financial bailout to buy bad
Uncertainty about how the U.S. government plans will revive
bank lending and dismal news from corporations shook tentative
hopes for some semblance of financial market stability.
"In a structural sense, people remain quite risk averse. The
market is very concerned about the real economy fall out," said
Geoff Kendrick, senior currency strategist at UBS in London.
"We've had already this morning confirmation that Germany is
in recession and we get the euro zone figures tomorrow, so
things are not looking very rosy," he added.
By 0915 GMT, the euro was up 1.5 percent on the day at
120.18 yen <EURJPY=>. Earlier in the global session it briefly
fell as low as 117.65 yen, the lowest since Oct. 28.
The dollar recovered from the day's low of 94.53 yen to
95.84 yen <JPY=>, up 1 percent on the day. Asia-based traders
said short-term speculators who bought the yen from around 97
yen sold the Japanese currency back to book profits.
EUROPE IN TURMOIL
Sterling was down 0.1 percent at $1.4912, having earlier
fallen to a 6-1/2 year low at $1.4807 <GBP=>.
The floundering pound gave way to intense pressure after the
Bank of England said on Wednesday that the British economy will
shrink sharply next year, bolstering expectations for further
aggressive rate cuts. [ID:nLC305847]
The BoE's indication of more interest rate cuts added to
expectations for further monetary easing by the European Central
Bank, sending the euro to a two-week low against the dollar
earlier in the global session at $1.2389 -- closing in on recent
Calyon senior currency strategist Daragh Maher said in a
note to clients there is likely to be further weakness for the
euro in the coming days.
"Already we have seen German GDP this morning which was much
weaker than expected at -0.5 percent Q/Q and showed the second
consecutive quarter of negative growth, confirming a technical
recession," he said.
"Other euro zone economies are set to follow suit in the
Later in the day, markets will look for hints on whether the
European Central Bank might step up its monetary policy easing
as several ECB policymakers including President Jean-Claude
Trichet are expected to speak at a banking conference in
(Reporting by Veronica Brown; Editing by Toby Chopra)
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