RTRS: Yen and dollar gain as global economic worries mount
The yen and dollar rose broadly on Monday due to mounting worries over the global economy that boosted demand for safer assets, while expectations of a euro zone rate cut this week weighed on the euro.
European shares .FTEU3 retreated, weighed down by Friday's U.S. payrolls data, which showed the world's largest economy lost over one million jobs in the final two months of the year.
The jobs figures added to a torrent of woeful economic data from around the globe that has smothered a budding revival for stock markets and risk appetite since the start of the year.
The low-yielding yen, which investors see as a safe-haven asset, rose to a one-month high against the euro, while demand for U.S. dollars also increased.
"We're seeing a very traditional risk aversion response after the non-farm payrolls data," Calyon deputy head of global foreign exchange research Daragh Maher said.
"The yen is gaining, especially on the crosses, and the dollar has regained its safe-haven angle."
At 1015 GMT (5:15 a.m. EST), the euro shed 0.7 percent against the yen to 120.39 yen, having earlier hit a one-month low of around 120.13 yen, while it lost 0.5 percent against the dollar to $1.3374.
The dollar also fell against the yen, losing 0.3 percent to 90.07.
The higher-yielding Australian dollar lost 2.3 percent versus the U.S. dollar to $0.6865 and 1.75 percent against the yen to 61.89 yen, weighed down by risk aversion and lower commodity prices.
Sterling, which is typically viewed as a high-risk currency, also fell sharply, dropping by 1.5 percent against the dollar to below the $1.50 mark.
ECB DECISION EYED
Markets will focus this week on Thursday's European Central Bank interest rate decision, with the euro hit by speculation that rate-setters will opt for a larger rate cut than the 50 basis points forecast by analysts in a Reuters poll last week.
Interest rate futures price in a high probability of a 75 basis point cut, and even some chance of a full 1-percentage point move.
"Going into the meeting, the euro will be under pressure as the market expects the ECB will cut (...) with economic data arguing in favor of aggressive easing," said BTM-UFJ currency economist Lee Hardman, who is forecasting a 50 basis point move.
Calyon's Maher said even a smaller cut of 25 basis points would probably weigh on the euro as investors fret that the central bank is not doing enough to stave off what could be a deep and prolonged recession.
"The mood at the moment is to sell the euro, and the market can spin whatever the ECB says to suit the mood," he said.
There is little in the way of key data releases due on Monday, but investors will be eyeing a speech by U.S. Federal Reserve Bank of Atlanta President Dennis Lockhart at 1740 GMT (12:40 p.m. EST).
Among other news, the Russian central bank staged the latest in a series of mini-devaluations of its currency as it allowed the ruble to weaken for the second day running.
