WSJ:WORLD FOREX: Stock Market Worries Send Yen Higher, Euro Lower
-- Yen continues to strengthen amid lack of fresh trading cues
-- Euro falls as stocks see sell-off from Wall Street
-- European bank woes and state of U.S. economy remain key factors
By Takashi Mochizuki
Of DOW JONES NEWSWIRES
TOKYO (Dow Jones)--Stock market declines around the globe sent the safe-haven yen higher and the euro lower in Asian trading Friday, with no signs that the equities sell-off was running out of steam.
Asian markets fell sharply after Wall Street tumbled 3.7% on Thursday amid heightened concerns about U.S. growth and the potential for a credit freeze in Europe. The Nikkei Stock Average closed with a 2.5% loss at 8719.24, its lowest since March 15.
"With Japanese shares performing so poorly, we are definitely on high alert for the risk of near-term Japanese intervention," said a senior currency options dealer in Tokyo. "Some contracts to hedge against an intervention risk are being offered, but they're too expensive now."
Other markets were similarly dismal. Australia's S&P/ASX 200 closed with a 3.5% loss, South Korea's Kospi Composite closed down 6.2% and Hong Kong's Hang Seng was off 2.9%.
FX trading was relatively subdued, however. The dollar fell to Y76.51 as of 0650 GMT from Y76.57 in late New York trade, according to data on EBS. The euro fell to $1.4310 from $1.4334, and Y109.49 from Y109.75. The dollar was at CHF0.7919 from CHF0.7941.
Comments by Lars Frisell, chief economist at Sweden's financial regulator, that the European interbank market could easily collapse dented confidence and fed fears that credit taps could be turned off, traders said.
"The worst kept secret in the world is that clearly one or two or more European banks are having liquidity issues. Clearly we have reached that point where banks don't trust each other again," said Charlie Aitken, managing director at equities brokerage Bell Potter.
Robert Rennie, the head of currency strategy at Westpac, said a report in the Wall Street Journal that the European banks in the U.S. are being closely watched by the Federal Reserve also weighed on confidence.
The European woes come amid growing concerns the U.S. economy is headed back into recession. Overnight, the Philadelphia Federal Reserve reported regional manufacturing activity contracted in its August survey.
Traders said there were no major indicator releases expected to be a major market factor for later in the day.
Interbank Foreign Exchange Rates At 02:50 EDT / 0650 GMT
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