CURRENCY ASIA
Euro falls in Asia
Ahead of expected rate cut
Agence France-Presse
First Posted 11:51:00 01/15/2009
Filed Under: Economy and Business and Finance, Foreign Exchange Markets
TOKYO -- The euro slipped against the dollar and yen in Asian trade Thursday as worries grew over Europe's economic health ahead of an anticipated rate cut by the region's central bank.
But dealers also saw little to cheer about in the United States or Japan where data again confirmed the gloomy state of their economies.
The euro fell to $1.3166 in Tokyo trade from $1.3184 late Wednesday in New York and to 117.15 yen from 117.36. The dollar was flat at 89.00 yen.
Investors were digesting news that credit ratings agency Standard & Poor's slashed its rating on Greece and warned of possible downgrades to Ireland, Portugal and Spain, said Hachijuni Bank forex strategist Masatsugu Miyata.
"The euro risks floundering further as it is very difficult to foretell economic prospects in Europe," he said.
The ratings news strengthened speculation that the European Central Bank may be forced to lower its key lending rate by as much as 75 basis points when it meets later in the day, he added.
Markets widely expect the central bank to reduce interest rates by at least 50 basis points from its current 2.50 percent.
The ECB has already lowered borrowing costs by 175 basis points since October but rates remain much higher than in the United States and Japan where they are close to zero.
Investors were also waiting for the ECB's post-meeting comments for clues on future monetary policy as the eurozone struggles to curb an accelerating downturn while its hands are getting tied by budget regulations, said Miyata.
The dollar continued to be soft against the Japanese currency as market participants parked their holdings under the safe haven yen.
But while US equity markets have tumbled on bleak corporate news, continued weakness in the financial sector and plunging US December retail sales, traders looked ahead to a new administration in less than a week.
The greenback's falls were capped by hopes over how incoming President Barack Obama will revive the economy and steer markets out of bearish territory, Miyata said.
In Japan, the government said core machinery orders, a leading index of corporate capital spending, plunged by a record 16.2 percent in November from the previous month, much worse than forecasts for a fall of 7.5 percent.
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