FOREX-Euro plunges on renewed bank and economic concerns

* Euro takes a hit as Europe banking concerns rekindled

* Yen rises to 15-year high versus dollar
(Adds quote, updates prices)

NEW YORK, Sept 7 (BestGrowthStock) – The euro slid broadly on
Tuesday and the yen hit a 15-year high as renewed fears about
the health of the European banking sector sparked risk
aversion.

A Wall Street Journal report that highlighted the
shortcomings of European bank stress tests in July spurred
buying in the yen and the Swiss franc, which are traditional
safe havens. The euro fell (Read more about the trembling euro. ) to a record low against the Swiss
franc.

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 strength of the Japanese
currency at the moment.

And 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].

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

And the cost of insuring those countries’ debt against
default rose, further chilling demand for the single currency.

“The market has been able to give full attention to the
negative European developments,” said Marc Chandler, global
head of currency strategy at Brown Brothers Harriman in New
York.

The developments include new questions about the bank
stress tests, concerns over the amount of capital that will
need to be raised under Basel III [ID:nLDE6850Q9], and reports
suggesting euro zone governments will seek to raise 100 billion
euros this month, roughly twice the amount raised in August,
Chandler said.

Midway through the New York trading day, the euro (EUR=: )
slipped 1.1 percent to $1.2732, the session low on Reuters data
and well off a three-week high of $1.2920 hit on electronic
trading platform EBS on Monday (EUR=EBS: ).

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

DOLLAR/YEN BELOW 84 YEN

Against a backdrop of mixed signals from Japan, the single
European currency (EURJPY=: ) fell 1.7 percent against the yen to
106.57 yen. The yen rallied across the board, last pushing the
dollar (JPY=: ) down 0.6 percent to 83.69 after hitting a 15-year
low of 83.51 on EBS (JPY=EBS: ) and 83.52 on Reuters data.

Earlier in the trading day, 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 yen 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 the Japanese currency is being bolstered by
expectations that incumbent Prime Minister Naoto Kan will stave
off a leadership challenge by rival Ichiro Ozawa
[ID:nTOE68606H].

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

The market’s focus on risk aversion also boosted the Swiss
franc, pushing the euro (EURCHF=: ) 1.3 percent lower to 1.2860
francs. It fell to a record low of 1.2844 francs on EBS and
Reuters data. The dollar (CHF=: ) was down 0.3 percent at 1.00097
francs.

The Australian dollar (AUD=: ) was down 0.5 percent at
$0.9128, hurt by general lack of risk appetite and 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.
(Reporting by Nick Olivari; Additional reporting by Anirban
Nag; Editing by Leslie Adler)

FOREX-Euro plunges on renewed bank and economic concerns