Euro Falls In Asia As Financial Fears Mount

Tuesday, September 30, 2008 at 11:09 am under Business News Euro Falls In Asia As Financial Fears Mount

TOKYO:The euro continued to fall against the dollar and the yen in Asia Tuesday as fears about the health of European banks grew after US lawmakers rejected a financial rescue plan, dealers said.

The yen remained well supported as investors fled riskier assets amid renewed turmoil on global markets that sent Asian stocks plunging.

The dollar fell to 103.89 yen in Tokyo morning trade from 104.03 late Monday in New York, where the Japanese currency had risen sharply.

The euro slid to 1.4368 dollars from 1.4432 and to 149.28 yen from 150.13 after US lawmakers rejected the 700-billion-dollar financial rescue plan touted by Washington as vital to avert economic collapse.

“Credit worries are deepening over the European financial system as well after the US bailout plan was rejected,” said Saburo Matsumoto, chief forex strategist at Sumitomo Trust Bank.

“The Japanese yen is being lifted in response to the fallout from the financial crisis in the United States and Europe,” he said.

The yen tends to be bought in times of financial turmoil as speculators cut back on risky investments funded with cheap Japanese credit.

Belgian-Dutch banking and insurance group Fortis, the Icelandic bank Glitner and the British mortgage lender Bradford & Bingley all had to be rescued in government bailouts Monday.

A fourth European bank, Franco-Belgian group Dexia, could also be on the verge of a state rescue deal after the group saw more than one quarter of its stock market value wiped out on liquidity concerns.

Matsumoto said market players were worried that the financial crisis was worsening outside of the United States as well.

“The euro may fall further,” he said. “We fear the credit worries may spread into emerging economies.”

A senior dealer at a major bank in Tokyo said the European single currency may drop to 1.4300. “The rejection of the US bailout plan made players speculate that European financial firms may face severe financing conditions ahead,” the dealer told Dow Jones Newswires.

In addition to economic data which have suggested the eurozone economy is not in good shape, “there are many reasons to sell the euro now,” the dealer said.