Euro hits 13-month low vs dollar
By Chikako Mogi
Reuters
First Posted 10:08:00 10/06/2008
Filed Under: Economy, Business & Finance
TOKYO, Japan -- The euro fell to a 13-month low against the dollar on Monday as investors shifted their focus to banking problems in Europe and whether a similar plan would emerge there following US approval of a key bailout package.
German and French officials denied on Sunday that they were set to endorse a common fund to bail out European banks.
There was no mention of a fund in a joint statement issued by leaders of France, Germany, Italy and Britain after their meeting in Paris on Saturday. While there was no uniform regional effort like the US to help the struggling banking sector, each country took steps to contain the spreading credit crisis.
"The euro is under selling pressure on disappointment and a bleak outlook for Europe's banking sector after European officials failed to come up with a similar bank plan following US approval of the bailout plan," said a senior dealer at a Japanese trust bank.
"There was expectation for a similar banking bailout plan given market worries about the European banking sector. Market focus has shifted to Europe from the US even when few in the market believe the US bank problems are over," he said.
The euro fell 0.9 percent to $1.3642 after plumbing a 13-month trough of $1.3610 in early Asia trade on Monday.
The dollar index, which tracks the dollar's value against a basket of six currencies, rose to a 13-month high of 81.159.
The US House of Representatives voted 263-171 to pass a $700-billion rescue package for the US financial sector on Friday, after the US Senate approved it on Thursday night, and President George W Bush promptly signed it.
The measure will allow the US Treasury to buy illiquid mortgage assets from banks and hopefully enable credit to flow again.
Traders said the euro was in a downtrend given the murkiness about the extent of Europe's banking problems and uncertainty over possible remedies.
Investors also remained wary of the US banking sector, keeping the dollar's upside limited and leaving the yen by default to benefit as investors reduce risk exposure, they said.
Japanese investors were selling the euro and Australian dollar and buying the yen, contributing to the single currency's drop to a 13-month low against the dollar, a senior dealer at a big Japanese securities firm said.
"The euro is in a downtrend overall, including against the yen, because of market suspicion there may be serious bank problems which haven't yet surfaced," he said.
The Aussie tumbled 2.8 percent to 79.18 yen the lowest since January 2005.
The euro was down 1.9 percent at 142.18 yen the lowest since May 2006.
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