LONDON—The euro came under renewed selling pressure Wednesday as worries about European banks and the threat of sovereign default returned to financial markets, but had firmed a bit early in New York.
Despite a warning from the Japanese Finance Minister Yoshihiko Noda that intervention remains possible, the yen pushed to a new 15-year high against the dollar as investors returned to havens.
The pound also found some support as the latest measure of U.K. house prices came in stronger than expected and new mergers and acquisitions worked in its favor.
Euro bulls have been frustrated in recent days by weak German industrial orders that indicate the euro zone's largest and strongest economy is starting to slow. This has combined with more reports that European banks are more exposed than expected and more speculation that they may yet have to seek additional capital.
"The debt crisis is more likely to return to the center of attention," said the currency-strategy team at Commerzbank AG, noting that prices on credit default swaps on problem countries have risen considerably since early August and are now not far from their peaks.
As investors moved out of the common currency and back into havens, the euro fell to a new all-time low of 1.2765 Swiss francs in European trading.
The yen was also a major gainer, with the dollar tumbling to a 15-year low at 83.34 yen.
By early morning in New York, the euro had firmed a bit to $1.2695 from $1.2692 late Tuesday in New York. It was at 106.40 yen from 106.30 yen, while the dollar was at 83.78 yen, compared with 83.75 yen.
The dollar was at 1.0108 Swiss francs from 1.0100 francs, while the pound rallied to $1.5449 from $1.5367.
The strong-yen trend was helped by data showing that Japanese machinery orders rose 8.8% in July, rather than just 2.0% as expected.
However, Mr. Noda appeared keen to send an unequivocal message to the market that intervention remains possible. Other officials, including from the Bank of Japan, had suggested over the last few days that any intervention wasn't imminent.
Although Mr. Noda's warning had a brief impact on sentiment, the yen soon resumed its advance on the market assumption that any attempt to intervene won't be successful unless the Bank of Japan eases monetary policy at the same time.
Hans Redeker, head of global foreign-exchange strategy at BNP Paribas SA in London, pointed to the Swiss National Bank failure to hold the Swiss franc back with intervention in May for just this reason.
"Hence, the market will pay more attention to Bank of Japan Gov. Masaaki Shirakawa's comment compared to talk coming out of the ministry of finance," Mr. Redeker said, noting that Shirakawa has recently noted that quantitative easing was helpful in stabilizing financial markets but had little supportive impact on the economy.
Help for the pound came from Halifax house-price data, which defied expectations of a decline, to show a 0.2% rise last month. However, sterling backed off a little from its earlier highs after new industrial-production data showed a 0.3% increase in July, not quite as much as the 0.5% rise that had been forecast.
