FOREX-Dollar up on euro zone woes; yen hits 15-year high

* Euro takes a hit as Europe banking concerns rekindled

* Yen hits 15-year high as traders watch for intervention

* Swiss franc hits record versus euro
(Adds quote, updates prices, changes byline)

By Wanfeng Zhou

NEW YORK, Sept 7 (BestGrowthStock) – The U.S. dollar rose against
most major currencies but fell to a 15-year trough versus the
yen on Tuesday as renewed concern about the health of European
banks sparked aversion to risk.

World stocks retreated and the euro weakened broadly after
a Wall Street Journal report said that recent stress tests of
the European banking sector underestimated some lenders’
holdings of potentially risky government debt.

The yen was also bolstered after comments by Bank of Japan
Governor Masaaki Shirakawa increased speculation that Japan was
not preparing to act to stem the yen’s strength in the near
term.

“Equity is the quickest reflection of overall market
confidence and I will say that the market confidence remains
low,” said Firas Askari, head of FX trading at BMO Capital
Markets in Toronto. “So you are seeing a renewed, somewhat
flight to quality and the U.S. dollar is bid across the
board.”

In early afternoon trading, the euro (EUR=: ) slipped 1.2
percent to $1.2714. It had earlier hit a session low of
$1.2698, according to electronic trading platform EBS, well off
a three-week high of $1.2920 hit on EBS on Monday (EUR=EBS: ).

Worries about the banking sector saw yield spreads between
peripheral euro zone government bonds and their German
counterparts — considered the safest in the euro zone —
widen, with Portuguese and Irish spreads in focus.

The euro was also weighed by comments from Germany’s
banking association on Monday that the country’s 10 biggest
banks may need 105 billion euros of additional capital under
revamped rules. A fall in German manufacturing orders in July
added to the euro’s woes.[ID:nLDE6850Q9][ID:nBAF004244].

Traders said the focus was turning to significant option
expiries on Thursday, when an estimated 1 billion euros are set
to roll off at $1.2600.

A spike in risk aversion boosted the Swiss franc, pushing
the euro (EURCHF=: ) 1.3 percent lower to 1.2860 francs. The pair
hit a record low of 1.2843 francs, according to Reuters data.
The dollar (CHF=: ) was down slightly at 1.0115 francs.

US DOLLAR BELOW 84 YEN

Against the yen, the dollar hit a 15-year low of 83.52 yen,
according to Reuters data (JPY=: ) and last traded at 83.68 yen,
down 0.6 percent. The euro fell (Read more about the trembling euro. ) 1.8 percent against the yen to
106.43 yen (EURJPY=: ).

The Bank of Japan’s Shirakawa said monetary authorities
could not control forex rates, increasing speculation that
Japan was not preparing to act to stem the yen’s strength at
the moment. [ID:nTOE68606B]

Shirakawa “has essentially ruled out intervention in the
near term,” CitiFXWire analysts said in a client note, adding
that the statement helped to encourage yen bulls.

Shirakawa’s comments followed the BOJ’s decision to hold
off from additional monetary policy easing. [ID:nTOE68602K]
However, Japanese Finance Minister Yoshihiko Noda on Tuesday
said the government would take firm action on currencies when
needed, saying recent moves were clearly one-sided.
[ID:nTKX006976]

Ashraf Laidi, chief market strategist at CMC Markets in
London said expectations that incumbent Prime Minister Naoto
Kan will stave off a leadership challenge by rival Ichiro Ozawa
also helped lift the yen [ID:nTOE68606H].

“The latter has shown vocal support in favour of
yen-supressing intervention,” he said.

The Australian dollar (AUD=: ) was down 0.5 percent at
$0.9128 as the ruling Labor Party secured enough numbers to
form a minority government [ID:nSGE6850I3]. Labor’s return to
power has made some investors cautious, with the government
expected to move forward with a tax on mining company profits.
(Additional reporting by Nick Olivari; Editing by Chizu
Nomiyama)

FOREX-Dollar up on euro zone woes; yen hits 15-year high