Thursday November 20, 2008 - 10:04:01 GMT
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Reuters - www.reuters.com
FOREX NEWS-Euro hits 1-week low vs yen, dlr, stocks struggle
* Euro hits one-week low vs dollar, yen on risk aversion
* Low-yielding yen gains broadly as stocks slide
* Fed pares economic outlook, further fuelling pessimism
(Changes dateline, byline, releads, changes throughout;
By Naomi Tajitsu
LONDON, Nov 20 (Reuters) - The euro hit a one-week low
against the yen and the dollar on Thursday after a dim economic
outlook from the Federal Reserve underlined dire global
conditions, sparking fresh demand for lower-yielding currencies.
The yen rallied across the board, as a near 3 percent drop in
European shares kept demand high to drop carry trades where the
low-yielding Japanese currency was used to buy assets in
higher-yielding ones, such as the euro and the Australian and
New Zealand dollars.
Stock markets suffered around the world, with the U.S. S&P
500 index dropping to its lowest since early 2003 .SPX. Some
analysts said moves in the yen have been tracking the stock
index very closely, and that a further S&P fall towards a
six-year low would push the Japanese currency higher.
"People are starting to give up on the hope that the economy
is going to recover," said David Woo, head of currency research
at Barclays Capital in London.
"Further losses in the S&P will lead to more yen gains."
By 0909 GMT, the euro <EURJPY=R> had fallen 0.7 percent to
119.22 yen, hovering near a one-week low of 118.59 yen hit
according to Reuters data earlier in the day.
It slipped 0.2 percent to $1.2495 <EUR=> having fallen as
low as $1.2472 earlier in the day to hit its weakest in a week.
The single European currency was pressured by a 2.55 percent
fall in regional shares, which approached a 5-1/2 year low due
to falls in commodity shares as U.S. crude oil prices CLc1 hit
their lowest level in nearly two years.
High-yielding currencies like the Australian and New Zealand
dollars in particular took a beating, with the Aussie falling
roughly 2 percent against the dollar <AUD=> and the yen
The New Zealand currency <NZD=> slipped more than 1 percent
to $0.5432, its lowest level since early 2003, and tumbled 1.3
percent against the yen. <NZDJPY=R>.
Investors shunned risk after minutes released on Wednesday
from the Fed's October policy meet showed the central bank sees
U.S. growth contracting in the second half of the year and the
first half of 2009, even after a 50 basis point interest rate
cut to 1.0 percent [ID:nN19340273].
This kept prospects high that U.S. rates could fall even
further as the Fed tries to minimise the impact of the
The latest casualties of the severe downturn are U.S.
automakers, who are begging for a government bailout as they
face the possibility of bankruptcy [ID:nN19320198].
Major central banks have been slashing rates aggressively in
an attempt to boost their economies during an extreme slowdown.
Figures this month show that Japan, and the euro zone fell into
a recession in the third quarter.
(Reporting by Naomi Tajitsu; editing by Chris Pizzey)
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