Euro falls further against dollar

TOKYO – The euro fell further against the dollar in Asia Monday on recurring contagion fears of eurozone debt problems.

The euro dropped to $1.4218 in Tokyo morning trade from $1.4258 in New York late Friday. The European single currency retreated to 114.72 yen from 114.91 yen. The dollar fetched 80.69 yen against 80.55 yen.

The euro lost ground against the dollar on Friday despite a bleak US employment report for June, as fears that the eurozone debt crisis would spread to Italy dampened sentiment on the European common unit, dealers said.

Traders sold off Italian debt and Italian banking stocks as they worried about the possibility the country would be undermined by the same debt concerns as those hitting Greece, Portugal and Ireland.

“The euro is weak amid worries about Italy,” said Teppei Ino, analyst at the Bank of Tokyo-Mitsubishi UFJ. “The liquidity crisis is not expected now, but the market is closely watching upcoming European events.”

The market remained jittery ahead of a top European officials’ meeting later in the day and the release this week of results of “stress tests” being carried out on Europe’s banking system.

Top EU economic officials will meet Monday in Brussels to “coordinate their positions” on the second Greek rescue package as Europe’s debt crisis threatens to deteriorate, a spokesman of the EU president told AFP.

The meeting will come before eurozone finance ministers head into fresh talks to craft the new Greek rescue package, as serious disputes remain over the role to be played by the private sector.

The euro moved lower against the dollar on concerns that “talks of Greek debt restructuring may finally occur,” Daisaku Ueno, chief analyst at Gaitame.Com Research Institute, told Dow Jones Newswires.

Still, how much the euro could suffer largely depends on what kind of debt restructuring could potentially be decided, Ueno said.

Issues in focus are whether the European Central Bank would continue to accept Greek bonds as collateral and how much valuation losses European financial institutions might have to incur, Ueno added.

The closely watched US jobs report showed that the economy generated a paltry net 18,000 jobs, lower than May’s poor 25,000 figure, signalling that things were not picking up at the end of the second quarter as economists had hoped.

“Despite its rise against the euro, the dollar’s undertone is not strong after US jobs report showed worrisome elements of its economy,” Ino said.