FOREX-Euro hits one-year lows contra yen on risk hatred

Thu Feb 25, 2010 4:08am EST Related News FOREX-Euro gains but beset by persistent Greek worriesTue, Feb 16 2010FOREX-Euro edges up but beset by persisting Greek worriesMon, Feb 15 2010FOREX-Euro edges up, investors look to EU summitMon, Feb 8 2010FOREX-Euro edges up, investors look to EU summitMon, Feb 8 2010FOREX-U.S. dollar, yen gain on Europe debt woesFri, Feb 5 2010

* Greek debt woes fuel risk aversion

Currencies

* Yen gains broadly, hits one-year high versus euro

* Analysts eye further yen strength into fiscal year-end

(Adds detail, comment, updates throughout; previous TOKYO)

By Neal Armstrong

LONDON, Feb 25 (Reuters) - The euro hit a one-year lowagainst the yen on Thursday as persistent worries over Greece"sfiscal position fuelled risk aversion, prompting safe-havenflows into the low yielding Japanese currency.

Worries over a possible downgrade of Greece"s sovereign debtwere seen as the trigger, after ratings agency Standard andPoor"s said late on Wednesday it may cut Greece"s BBB+ rating byone or two notches within a month. [ID:nLDE61N2KL]

Concern over Greece"s ability to pay its debts has driventhe euro down more than 10 percent from its December highs.

The Greek government has proposed spending cuts, promptingtens of thousands of Greeks to strike in protest on Wednesday.

The low yielding yen was the main beneficiary in Asian tradeas risk aversion fuelled a rally into the Japanese unit.

"The yen is in favour after sentiment deteriorated overGreece Wednesday. It does tend to strengthen when times gettough and I would also say the yen is likely to remain in favourgoing into Japanese fiscal year-end", said HSBC director ofcurrency strategy Paul Mackel.

At 0859 GMT, the euro was down around 1.3 percent versus theyen at 120.64 yen EURJPY=R, close to one-year lows hit in Asiaat 120.21 hit in late Asian trade. Traders said large optionbarriers positioned at 120.00 could slow further yen strength.

Versus the dollar, the euro EUR= dropped back below$1.3500 and stayed close to a nine-month low of $1.3445 hit onFriday. It was trading at $1.3490 in early European dealing.

The euro"s fall gained steam after it hit stops below 121.50and $1.3500, said Kazuyuki Takami, senior manager in the foreignexchange trading department at Bank of Tokyo-Mitsubishi UFJ.

Takami said falls in yen crosses were initially led byJapanese exporters, adding that overseas hedge funds were alsoseen selling.

Higher-yielding currencies such as the Australian and NewZealand dollars also came under heavy pressure versus the yen asJapanese margin accounts were forced into stop-loss drivenselling.

The Australian dollar was down more than 1 percent at 79.45yen AUDJPY=R, after dropping to 79.17 into European trade.Sterling tumbled to a nine-month low against the yen GBPJPY=Ras worries over the UK economy weighed on the pound.

The yen also gained close to 1 percent against the dollarJPY=, though technical traders noted strong support around theday"s lows from the base of the Ichimoku Cloud. Japanese bidswere noted supporting under 89.30.

The dollar traded with slight gains versus a basket ofcurrencies .DXY, up 0.1 percent at 80.95. It had slipped backon Wednesday after Federal Reserve Chairman Ben Bernanke toldCongress a weak jobs market and low inflation would likely allowthe Fed to keep rates low for "an extended period".

That poured cold water on market expectations that U.S.interest rates would rise sooner rather than later -- a viewboosted after the Fed raised its discount rate last week.

(Additional reporting by Kaori Kaneko; Editing by NigelStephenson)

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