Eurozone concerns weigh on currency

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IOL pic jun6 euro notes Reuters File picture: Lee Jae-Won

London - The euro touched multi-month lows against the dollar and yen on Wednesday as investors fret about the impact on the eurozone economy of possible fresh sanctions against Russia following the downing of Flight MH17.

In late afternoon Tokyo trade, the single currency bought $1.3461 and 136.51 yen, down from $1.3465 and 136.62 yen in New York late on Tuesday.

However, it was up marginally from the earlier exchanges when it touched $1.3458 at one point, its lowest since November, and 136.40 yen, its weakest level since February.

The dollar fetched 101.40 yen compared with 101.45 yen in US trade.

The greenback was supported by data showing US inflation slowed in June to 0.3 percent, from 0.4 percent in May, suggesting there was no need for the Federal Reserve to raise interest rates sooner than the expected middle of 2015.

The euro is facing selling pressure as investors worry that another round of sanctions on Russia will have a knock-on effect for the eurozone.

Moscow is facing fresh measures over its support for Ukrainian rebels who have been accused of shooting down Malaysia Airlines Flight MH17 last week. But with the eurozone heavily reliant on its giant eastern neighbour for energy supplies, there are fears the bloc's already fragile economies could suffer as a result.

Adding to the geopolitical tensions, major US, European and Canadian airlines cancelled flights to and from Israel Tuesday, after a rocket fired from Gaza struck near its main international airport in Tel Aviv.

However, IG Securities' Junichi Ishikawa said the euro's weakness may be more linked to a possible divergence in monetary policy between the European Central Bank and the Fed.

The ECB has launched unprecedented easing measures which may weaken the euro as the Fed scales back its stimulus programme, a move which tends to support the dollar.

In other trading the Indonesian rupiah battled back against the dollar after the reform-minded governor of Jakarta, Joko Widodo, was declared winner of Indonesia's closely fought presidential election.

The rupiah had dropped as low as 11,620 against the dollar late on Tuesday but was trading at 11,505 against the greenback on Wednesday.

The dollar was mostly down against other Asia-Pacific currencies.

It weakened to Sg$1.2392 from Sg$1.2406, to 43.29 Philippine pesos from 43.36 pesos, to 1,024.20 South Korean won from 1,024.73 won, and to 31.75 Thai baht from 31.87 baht.

It was flat at 60.19 Indian rupees.

The Australian dollar edged up to 94.40 US cents from 93.89 cents, while the Chinese yuan was lower at 16.34 yen against 16.36 yen. - AFP


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