Tuesday December 9, 2008 - 13:50:17 GMT
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Reuters - www.reuters.com
FOREX NEWS-Euro, pound beaten down by grim data; risk demand low
* Euro flops vs dollar <EUR=>, yen <EURJPY=>
* German ZEW sentiment beats f'cast; current conditions weak
* Risk demand still low, Japan growth contracts
(recasts, adds quotes, updates prices)
By Veronica Brown
LONDON, Dec 9 (Reuters) - The euro lost ground against the
dollar and yen on Tuesday, beaten down as investor concern
focused on economic sentiment in the single currency bloc's
The Mannheim-based ZEW economic think tank's poll of
economic sentiment unexpectedly rose to -45.2 in December from
-53.5 in November, but the current conditions component
worsened, while it also saw Germany's economy slipping deeper
into recession [nSAB020603].
"It's not a particularly rosy picture for the euro zone
right now," UBS senior currency strategist Geoff Kendrick said.
"Markets are very uncertain and unsure of which way to go."
Uniformly grim UK economic data also put the British pound
under pressure, as economists pointed to further cuts in Bank of
England interest rates.
Demand for risk was generally low after figures earlier on
Tuesday showed the Japanese economy contracted 0.5 percent in
July-September, far more than an initial reading of a 0.1
percent decrease [ID:nT356356].
Japanese technology company Sony Corp (6758.T: Quote, Profile, Research, Stock Buzz) also
announced major layoffs.
The euro <EUR=> fell 0.7 percent to $1.2845 by 1207 GMT,
pulling back from $1.2968 hit on Monday, according to electronic
trading platform EBS, its strongest level since late November.
Sterling fell 1 percent on the day to $1.4764, while the
euro hovered near record highs reached the previous day against
the UK unit <EURGBP=>.
The dollar traded 0.6 percent higher against a basket of
currencies .DXY at 86.170, but it was slightly weaker at 92.70
Yen strength pushed the euro down 1.0 percent to 119.00 yen
<EURJPY=R>. The higher-yielding Australian <AUDJPY=R> and New
Zealand <NZDJPY=R> dollars were down more than 1 percent against
the low-yielding Japanese currency.
Sterling <GBPJPY=R> also dropped 1.1 percent against the yen
as investors continued to unwind carry trades, where the yen was
used to fund investments in higher-yielding currencies.
Share prices rallied on Monday on a plan announced at the
weekend by U.S. President-elect Barack Obama for massive
infrastructure spending to boost the economy, and anticipation
of a bailout plan for ailing U.S. automakers.
But weak Japanese growth data reinforced fears that the
world's second-largest economy is facing its longest contraction
ever, forcing Sony, one of the nation's biggest electronics
makers, to cut 5 percent of its workforce as part of its
restructuring efforts [ID:nT7887].
"The harsh reality of global weakness is still coming
through in markets," said Stephen Koukoulas, strategist at TD
Securities in London.
Investors were also wary of taking on risk as they awaited a
U.S. emergency loan package for its top three automakers, while
figures late last week showed that the U.S. lost more than half
a million jobs in November alone [ID:nN08534770].
Rapidly deteriorating economies have prompted central banks
to slash rates aggressively.
The Bank of Canada is expected to cut rates by 50 basis
points from 2.25 percent later in the day, according to a
Reuters poll [ID:nN05295443], although some in the market are
bracing the possibility of an every bigger cut.
(Reporting by Veronica Brown; Editing by Victoria Main)
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