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FOREX-Euro remains under pressure, yen edges up

Published 01/28/2010, 07:05 PM
Updated 01/28/2010, 07:09 PM

* Euro hovers near 6-1/2-mth low vs dollar, 9-mth low vs yen

* Concerns over Greece's fiscal position continue

* Yen keeps firm tone as fall in stocks undermines sentiment

By Charlotte Cooper

TOKYO, Jan 29 (Reuters) - The euro hovered above a six-month low against the dollar and a nine-month low versus the yen on Friday as concerns about Greece's fiscal situation intensified, and the yen edged up as weak stocks further clouded sentiment.

After a week of worries over debt of smaller euro zone countries, White House plans to limit risk-taking at U.S. banks, credit tightening steps in China and a slide in global stock markets, investors have cut risk trades funded by the yen and dollar.

A batch of data is due out of the euro zone, including inflation and unemployment, but the main data focus will be U.S. fourth-quarter gross domestic product at 1330 GMT.

"The (weak) sentiment is likely to continue," said Tohru Sasaki, chief foreign exchange strategist Japan at JP Morgan Chase.

The euro fell 0.1 percent from late U.S. trade to $1.3960, after dropping to $1.3930 on Thursday on trading platform EBS, its worst showing since mid-July, as investors worried Greece may not be able to service its debt.

Germany and France denied a report suggesting an imminent European Union bailout for Greece, while Athens said it had not requested help and was the victim of speculators intent on attacking it as the euro zone's "weak link".

The premium that investors demand to hold Greek government bonds rather than benchmark German Bunds rose to its highest level since the euro was launched more than a decade ago.

The cost of insuring Greece's sovereign debt against default also hit a record high.

Adding to pressure on the euro were warnings by credit ratings agencies that Portugal needs a clear plan for further budget cuts beyond 2010 to prevent debt rating downgrades.

The euro fell 0.2 percent to 125.30 yen, holding just above a nine-month low of 125.10 yen set on Thursday.

The dollar also slipped 0.2 percent to 89.77 yen, holding above a six-week low of 89.14.

The dollar index stood at 78.974, after touching a five-month high this week at 79.066. It is sitting on its 100-week moving average at 78.941.

The U.S. economy is expected to have grown at an annualised 4.6 percent in the fourth quarter, double the rate in the third quarter when the economy resumed expansion after four consecutive quarters of declines.

A fall on Wall Street also undermined investors' willingness to hold risk positions.

The higher-yielding Australian and New Zealand dollars both slipped in early trade against the low-yielding U.S. dollar and the yen. (Reporting by Charlotte Cooper; Editing by Chris Gallagher)

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