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FOREX-Dollar, yen gain as investors grow wary on economy

Published 06/15/2009, 09:00 PM
Updated 06/15/2009, 09:16 PM
MFG
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* Euro falls to one-month low vs dollar after weak data

* BOJ to announce policy decision, seen holding rates steady

* Market awaits outcome of BRIC summit

TOKYO, June 16 (Reuters) - The dollar and the yen rose on Tuesday after weak data in the United States and Europe plus a slide in global stocks encouraged caution about the global economy, prompting investors to cut bets on riskier assets.

The euro extended losses to hit its lowest level in a month against the dollar after the European Central Bank said euro zone banks will probably need to write down another $283 billion. Separately, data showed that the euro zone lost a record 1.22 million jobs in the first quarter of 2009.

Commodity-linked currencies such as the Australian and New Zealand dollars softened as investors continued to take profits after falls in stocks and oil prices.

"Investors are shifting to a cautious tone on the economy from their optimistic view previously," said Kazuyuki Kato, treasury department manager at Mizuho Trust and Banking.

"Investor profit-taking in the euro and commodity-related currencies will likely continue, led by short-term players due to a retreat in optimism and for technical reasons," he said. Monday's data showed the New York state factory sector shrank at a more severe rate in June than during the previous month. The dollar index, a gauge of the greenback's performance against six other major currencies, rose 0.2 percent to 81.308.

The euro dipped 0.3 percent to $1.3757 after falling as low as $1.3748 on electronic trading platform EBS, the lowest since May 21.

The euro fell 0.5 percent to 134.36 yen, dragging the dollar lower against the yen, traders said.

The dollar was at 97.67 yen, down 0.2 percent on the day.

The Australian dollar fell 0.3 percent to $0.7924 and the kiwi dropped 0.5 percent to $0.6272.

The Bank of Japan will announce its monetary policy decision later in the day and is seen keeping interest rates on hold at 0.1 percent. The BOJ is expected to sound a slightly more upbeat tone on Japan's economy following improved exports and output.

The market is also looking to the outcome of the first summit among leaders of Brazil, Russia, India and China to discuss the global financial crisis and reforms of the world's financial and trade institutions.

The dollar found support after Russian Finance Minister Alexei Kudrin expressed confidence over the weekend in the greenback as the world's reserve currency. His comments eased worries about major emerging market countries diversifying away from the dollar. (Reporting by Kaori Kaneko; Editing by Michael Watson)

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