FOX: Euro falls on renewed bank and economic concerns
By Nick Olivari
NEW YORK (Reuters) - The yen rose to a 15-year highagainst the dollar and the euro slid across the board Tuesday as rekindled concerns about the European banking sectorrenewed risk aversion.
The yen and Swiss franc, seen as safe havens, rallied asrisk aversion was spurred by a Wall Street Journal reporthighlighting the shortcomings of European bank stress tests inJuly.
This followed comments from Germany's banking associationon Monday that the country's 10 biggest banks may need 105billion euros of additional capital under revamped rules.
A fall in German manufacturing orders in July added to thesingle currency's woes. .
Worries about the banking sector also saw yield spreadsbetween peripheral euro zone government bonds and their Germancounterparts -- considered the safest in the euro zone --widen, with Portuguese and Irish spreads in focus.
The cost of insuring those countries' debt against defaultalso rose, further chilling demand for the single currency.
"The market has been able to give full attention to thenegative European developments," said Marc Chandler, globalhead of currency strategy at Brown Brothers Harriman in NewYork.
These include new questions about the stress tests,concerns over the amount of capital that will need to be raisedunder Basel III , and reports suggesting eurozone governments will seek to raise 100 bln euros this month,roughly twice the amount raised in August, Chandler said.
In early New York trade, the euro slipped 0.9percent on the day to $1.2762. It fell as low as $1.2736 onReuters data, off a three-week high of $1.2920 hit onelectronic trading platform EBS on Monday .
The focus was turning to significant option expiries onThursday, when an estimated 1 billion euros are set to roll offat $1.2600.
"We've seen the euro's correction since June take it to the$1.30 region, and people are getting worried about morenegative news about the euro zone banking sector in the thirdand fourth quarter," said Chris Turner, currency strategist atING in London.
DOLLAR/YEN BELOW 84 YEN
Against the backdrop of mixed signals from Japan, thesingle currency fell 1.5 percent on the day to 106.71yen. The Japanese currency rallied across the board, lastpushing the dollar down 0.7 percent to 83.57 after goingto a 15-year low of 83.51 on EBS and 83.52 on Reutersdata.
Earlier in the trading day, Bank of Japan Governor MasaakiShirakawa said monetary authorities could not control forexrates, increasing speculation Japan was not preparing to act tostem yen strength at the moment. "(Shirakawa) has essentially ruled out intervention in the nearterm," CitiFXWire analysts said in a client note adding thatthe statement helped to encourage yen bulls.
Shirakawa's comments followed the BOJ's decision to holdoff from additional monetary policy easing.
However, Japanese Finance Minister Yoshihiko NodaTuesday said the government would take firm action oncurrencies when needed, saying recent moves were clearlyone-sided.
"The risk of intervention is great, but this will only slowthe appreciation rather than cause any trend reversal," saidBTM-UFJ's Hardman.
The market's focus on risk aversion also boosted the Swissfranc, pushing the euro 1 percent lower to 1.2893francs. The dollar was down 0.2 percent at 1.0102. The Australian dollar was down 0.4 percent at $0.9136,hurt by general lack of risk appetite and as the ruling LaborParty secured enough numbers to form a minority government. Labor's return to power rekindled talk thegovernment would press ahead with a tax on mining companyprofits.
