The euro fell sharply on Tuesday, nearing a seven-month low against the dollar after Standard and Poor's cut its debt rating in Italy and as investors worry about whether Greece can borrow money much needed cash international lenders.
These concerns encouraged investors to exit a wide range of riskier assets, with the Australian dollar briefly linked with the growth economy, currency hit a one-month low and emerging as the Brazilian real is under heavy pressure.
The European single currency hit a session low of $ 1.3599 after the news from Italy, but trimmed some losses as traders reached an agreement with the cut classification.
"The downgrade is clearly negative for the euro, but I do not think anyone at this stage is particularly surprised or shocked that happened," Teppei said Ino, currency analyst at Bank of Tokyo-Mitsubishi UFJ in Tokyo.
"The downward trend in the euro is likely to continue, but it will not be a simple depression - It seems that Euro traders are short, but every little positive news coverage of solid shot short."
Trade was 0.3 percent, to $ 1.3644, surpassing back to a seven-month low of $ 1.3495 hit last week. A break of this level could pave the way for a test of 1.3410 U.S. dollars, the decrease of 50 percent of its rise since June last year to May this year.
S & P cut ratings of Italy has preceded any move by Moody, who had expected that the first credit rating agency to downgrade the country.
The common currency was soon found solace in recent operations in the U.S. Greece on Monday after he said it was close to an agreement with its international creditors, although investors were far from convinced.
Greek Finance Minister Evangelos Venizelos said the country call the conference with its international creditors was successful and will continue on Tuesday, but added some still left to do.
Against the yen, the euro fell 0.3 percent to 104.45 yen, a stone's throw of at least 10 years of 103.90 yen hit last week.
FED FOCUS
Fears of global economic instability, given the turmoil in Europe and a slowdown in the United States also led market players to sell risky assets such as stocks, commodities, emerging currencies while the economy as the won Korean and Singapore dollar, which have less liquid than the U.S. dollar, it came down on Monday.
The Australian dollar fell 0.6 percent to a fresh one-month low of $ 1.0148. But recovered to trade a little above the levels of late New York on $ 1. 0235 after several minutes Reserve Bank of Australia policy meeting in September said the bank remains concerned about the inflation outlook in the medium term.
Although the market has priced in big cuts in interest rates later this year, the RBA noted that a number of technical factors means that market prices is not necessarily a true reflection of the political expectations money.
Weakness in Asian currencies, with the softer euro helped the dollar index - an indicator of the performance of the dollar against a basket of currencies - hover at 77,228, within shouting distance of 7-month peak reached 77.784 last week.
The dollar could be hurt if the U.S. Federal Reserve to take bolder steps to facilitate the markets expect on Wednesday, when it ends a two-day meeting. But many analysts suspect that U.S. inflation relatively high U.S. may slow central banks of the wide-scale adoption of acceleration.
"A great read of the CPI does not justify the quantitative easing. But if the Fed does not do what people are already expecting that could destabilize the markets, so you have to do what is expected," said Koji Fukaya, chief strategist Currency Credit Suisse in Tokyo.
The Fed is expected to try to push long-term, low interest rates even lower this week by the bias toward longer-term bonds in its portfolio, a move known as Operation rotation.
The Japanese yen was little changed at 76.60 yen per dollar, near a record high of 75.94 yen hit last month, despite the caution about the possibility of intervention by Japanese authorities are kept under control.
"Leaving aside the question of whether the yen is a safe asset, the repatriation of Japanese investors is likely to support the yen, for now, as both the euro and the dollar only negative factors," said Makoto Noji, strategist at Nikko Securities SMBC.
(Additional reporting by Antoni Slodkowski, Editing by Edwina Gibbs)
12 years ago
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