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Euro weak on risk aversion

| banglanews24.com
Update: 2010-06-24 3:51:11 PM

TOKYO - The euro was under pressure against other major currencies in Asia on Friday as risk aversion grew on falling stock prices ahead of a G20 meeting, encouraging safe-haven yen buying, dealers said.

The euro changed hands at 1.2315 dollars in Tokyo morning trade, down from 1.2328 in New York late Thursday. It slipped to 110.23 yen from 110.47 yen.

The dollar was trading at 89.50 yen, from 89.67 in New York.

Investors were "shunning risks as stock prices are falling," said Hideaki Inoue, dealer at Mitsubishi UFJ Trust and Banking.

The benchmark Nikkei index on the Tokyo Stock Exchange fell 1.92 percent after a plunge on Wall Street on worries over the US economic recovery and looming financial reform legislation.

The euro also faced selling ahead of weekend meetings of the Group of Eight and Group of 20, which are to discuss reform plans for the financial industry.

Investors are not willing to hold long euro positions as the "fundamentals of the European economies are not firm," Shinkin Asset Management senior dealer Jun Kato told Dow Jones Newswires.

China`s central bank set the strongest yuan exchange rate in years on Friday, as international pressure builds for a stronger currency ahead of the G20.

The move had little impact on the dollar, which had already been sold on Beijing`s announcement that it would allow greater flexibility of its currency.

"The market knows China is guiding the yuan higher toward the G20 in a bid to" stave off criticism, Inoue said.

The People`s Bank of China set the central parity rate -- the centre point of the currency`s allowed trading band -- at 6.7896 to the dollar, 0.3 percent stronger than Thursday`s 6.8100.

China has tweaked the rate up and down this week ahead of the summit and has a history of letting the yuan strengthen slightly in the lead-up to sensitive events, apparently to defuse criticism that it keeps the currency too low.
The main issues on the G20 agenda will likely be reforms of the financial industry, tackling fiscal debt and how to balance austerity with growth, Inoue said.

The dollar was higher against other major Asian currencies, rising to 1.3958 Singapore dollars from 1.3867, to 46.55 Philippine pesos from 46.07, and to 1,213.25 South Korean won from 1,187.00.

The dollar gained to 32.45 Thai baht from 32.38, to 32.09 Taiwan dollars from 32.00 and to 9,072.50 Indonesian rupiah from 9,040.00.

BDST:1218 HRS, June 25 2010

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