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FOREX-Euro falls to 1-mth low vs dlr after debt downgrades

Published 12/08/2009, 09:17 PM
Updated 12/08/2009, 09:21 PM

* Euro falls to 1-mth low vs dollar on govt debt worries

* Fiscal concerns push down sterling to 8-wk low vs dollar

By Rika Otsuka

TOKYO, Dec 9 (Reuters) - The euro fell to a one-month low against the dollar on Wednesday as investors unwound positions in riskier assets ahead of the year-end, prompted in part by rising debt woes for Greece and Dubai.

Worries about Britain's fiscal health continued to pressure sterling, which slid to an eight-week low against the dollar.

Fitch Ratings downgraded Greece while Moody's cut the ratings of six Dubai-linked issuers after concluding that no "meaningful" government support would be provided to top firms like DP World..

The timing of Greece's downgrade, coming soon after the Dubai shock, led to a sell-off in the euro, stocks, commodities and higher-yielding currencies.

"Profit-taking on riskier assets and risk aversion are the dominant themes," said Matthew Strauss, senior currency strategist at RBC Capital Markets. "With no major data releases today, it might be wise not to stand in front of the current currency trends."

Both the yen and the dollar tend to gain when worries about a global recovery or concerns about debt defaults rattle markets.

The euro fell as low as $1.4665, its lowest since early November but later gained to $1.4727, up 0.2 percent from late U.S. trade. It had shed 0.8 percent on Tuesday. Traders say immediate support is seen at $1.4625.

The dollar index hit a fresh one-month high of 76.331 in early Asian trade before slipping back to 76.155, down 0.2 percent.

Sterling hit an eight-week trough against the dollar at $1.6224 before crawling back to $1.6259 to be down 0.2 percent on the day, according to Reuters data.

Soft UK data, a hefty fall in the value of Royal Bank of Scotland's shares and worries about the state of Britain's public finances and AAA rating have weighed on sterling.

The yen kept most of its broad gains made the previous day when investor risk aversion benefitted the Japanese currency.

The dollar was little changed from late U.S. trade at 88.47 yen, well off a one-month peak of 90.78 yen reached late last week.

Charts indicate the yen could advance to as far as 87.80 yen per dollar, while support is expected around the 88.80 yen mark.

The euro inched up 0.3 percent to 130.33 yen, after it shed more than 2 percent on Tuesday.

"Moves to cut back on risk are making the yen investors' favourite currency at the moment, even though there are few factors that would inspire investors to pick up the yen aggressively," said Shuichi Kanehira, senior vice president of forex division at Mizuho Corporate Bank.

Japan's economy grew 0.3 percent in the third quarter, sharply less than a preliminary estimate, with the country's recovery from its worst postwar recession is still shackled by slow capital spending, data showed on Wednesday.

On Tuesday, the Japanese government agreed on a $81 billion stimulus package aimed at preventing the economy from slipping back into recession as deflationary worries mount and a strong yen undermines an export-led recovery.. (Additional reporting by Anirban Nag in Sydney; Editing by Edwina Gibbs)

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