RPT-GLOBAL MARKETS-Asian shares slip; rising yen hits Nikkei

Published 09/07/2010, 10:52 PM
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(Fixes typo in first paragraph)

* Nikkei down 2 percent after yen hits 15-year high

* Bank worries push euro to record lows vs Swiss franc, A$

* Retreat from risk boosts gold, hits oil (Repeats item to more subscribers)

By Alex Richardson

SINGAPORE, Sept 8 (Reuters) - Asian stocks fell on Wednesday, with Japan's big exporters among the heaviest losers as a rise in the yen to a new 15-year high threatens to erode their overseas earnings.

The euro was on the defensive after renewed fears about the euro zone banking system drove it to life lows against the Swiss franc and Australian dollar, hitting financial stocks and dragging equity markets in Europe and the United States lower.

"It's the same old ugly contest -- which currency is the least unattractive," said a dealer at a local bank in Sydney.

Japan's Nikkei <.N225> fell 2 percent, with the electric equipment, retail trade and motor vehicle sectors the biggest drags on the index.

Exporters Honda Motor <7267.T> fell 2.9 percent and chip-tester maker Advantest <6857.T> lost 4.2 percent as the yen traded at 83.66, just off a 15-year high hit on Tuesday of 83.51. [.T]

"The dollar falling below 84 yen has completely neutralised any positive impetus from the jump in machinery orders," said Masayoshi Okamoto, head of dealing at Jujiya Securities.

MSCI's broadest index of Asian shares outside Japan <.MIAPJ0000PUS> eased 0.4 percent.

EURO WORRIES

Worries about Europe's banks resurfaced on Tuesday, when the Wall Street Journal reported that some major lenders had understated holdings in potentially risky government debt during "stress tests" designed to test their ability to weather crises.

Ireland added to the jittery mood, extending its guarantees for short-term bank liabilities amid fears over the escalating cost of bailing out nationalised lender Anglo Irish [ANGIB.UL]. [ID:nLDE6861YN]

The euro was pinned at $1.2690 , having dived from $1.2876 on Tuesday and a three-week high of $1.2920 the day before.

Traders were now looking for a test of support around $1.2625, though they were not keen to go long of the U.S. currency either given concerns about the country's faltering economic recovery. [FRX/]

The dollar hit a fresh 15-year trough of 83.51 yen before talk of "semi-official" bids and option protection at 83.50 helped it edge up to 83.74.

Analysts at BNY Mellon, who track investor flows in and out of currencies, reported net outflows from the euro and the U.S. dollar.

Wall Street stocks were almost as unpopular as sovereign bonds from the hard pressed euro zone "periphery" such as Greece and Ireland.

"Investors clearly remain concerned about the sovereign debt burden of a number of peripheral euro zone nations and, as a result, are still keen to reduce their exposure to the euro as a result," BNY Mellon said in a note.

"On the other hand, they also have little faith in the outlook for the U.S. economy and are reducing their exposure steadily."

A broad retreat from riskier assets boosted gold and dented oil, with spot gold rising more than $3.50 to $1,256.60 while U.S. crude eased 0.5 percent to below $74 a barrel. [GOL/] [O/R] (To read Reuters Global Investing Blog click on http://blogs.reuters.com/globalinvesting; for the MacroScope Blog click on http://blogs.reuters.com/macroscope; for Hedge Fund Blog Hub click on http://blogs.reuters.com/hedgehub)

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