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FOREX-Euro rally stalls, yen tries for higher ground

Published 06/16/2009, 08:35 PM
Updated 06/16/2009, 08:40 PM

* Euro edges down vs dollar after rally stalls

* Yen rises as risk aversion encourages move out of crosses

By Charlotte Cooper

TOKYO, June 17 (Reuters) - The euro slipped on Wednesday, losing its grip on gains made after Russia suggested the need for a reserve currency other than the dollar, while the yen rose as a dip in investor confidence prompted a move out of riskier assets.

Leaders of Brazil, Russia, India and China ended a summit on Tuesday demanding a greater say in the global financial system but steered clear of an assault on the dollar's reserve status.

The greenback had fallen on Tuesday after a Russian official said the currency issue would be raised at the summit, dropping sharply against the euro and yen.

But the euro failed to push higher as Asian trade got underway and analysts said it looked vulnerable to a mood of deteriorating investor confidence which has undermined share markets and taken higher yielding currencies off recent peaks.

"It's a sell-on-rallies mentality short term," said Sue Trinh, senior currency strategist at RBC Capital Markets in Sydney.

In choppy trade, the euro fell 0.1 percent to $1.3828, edging back towards a one-month low of $1.3747 set on trading platform EBS on Tuesday.

The yen surged ahead, pushing the dollar below 96.00 yen to its lowest in two weeks and the Australian dollar to its weakest in almost three weeks.

The dollar later edged back to stand 0.1 percent down at 96.26 yen, the euro fell 0.2 percent to 133.11 yen and the Aussie shed 0.4 percent to 76.10 yen after dipping as far as 75.64 yen.

The Australian dollar and the euro have been on the rise against the dollar and yen since March as investors grew more confident that the worst of the financial crisis was over and the speed of the global downturn was slowing.

But analysts say markets such as shares and the higher yielding currencies may have got ahead of themselves and need a pause or correction while investors assess how quickly major economies really are healing. (Editing by Joseph Radford)

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