Euro slips on fresh worries over Europe

The euro’s roller coaster ride continued in Asian trade on Tuesday after it plummeted to a near 12-year-low against the yen a day earlier on worries about the troubled eurozone.
The single currency bought $1.2120 and 94.92 yen in Tokyo afternoon trade, down from $1.2137 and 95.13 yen in New York late Monday.
However the embattled currency’s trading level was an improvement from Asian trade on Monday when it dropped to 94.24 yen, its lowest level since November 2000.
The dollar, meanwhile, traded at 78.24 yen against 78.37 yen, with the Japanese currency seen as a safe-haven unit amid turmoil in Europe and an uncertain US economic recovery.
Among the factors driving down the euro was Spanish borrowing costs hitting record highs on speculation that Madrid could soon require a full state bailout.
Moody’s also took the first step toward stripping Germany of its coveted AAA credit rating on Monday, cutting the outlook for Europe’s largest economy to “negative”.
A similar move was announced for fellow AAA ranked economies, the Netherlands and Luxembourg.
In Tokyo on Tuesday, Japan’s Finance Minister Jun Azumi repeated warnings about the yen’s soaring value and hinted at another possible currency market intervention in a bid to tame the unit.
“We will not rule out any measures against excessive moves and will take decisive action when that’s deemed necessary,” he told reporters.
Bank of Japan governor Masaaki Shirakawa said that he would watch for any fallout from the European crisis.
“If Europe’s problems deteriorate further, that would have an impact on the Japanese economy via trade, business sentiment, foreign exchange rates and the financial system,” he said in parliament.
“It is necessary for us to first pay sufficient attention to those risk factors”, he added.
Australia’s Westpac bank said policymakers outside the eurozone may usher in further monetary easing measures over increasing worries about Europe and how it impacts the global economy.
Spain’s problems have spread to its increasingly insolvent regional governments, Italy’s situation is similarly desperate, while Greece has come up well short of the targets specified under its second bailout package, it noted.
“In all three economies the negative feedback loops are accelerating and the situation is spiralling down. There is a desperate need for a circuit breaker,” the Australian bank said.
Markets were eyeing Greece with auditors from the European Union, International Monetary Fund and the European Central Bank due in Athens this week for another inspection of the new government’s economic programme.
The report will determine whether Greece will receive fresh loans of 31.5 billion euros by September due under its debt rescue programme.
The dollar was mixed on Tuesday against other Asia-Pacific currencies.
It eased to Sg$1.2587 from Sg$1.2598 on Monday, while firming to 56.05 Indian rupees from 55.80 rupees, to 9,491.00 Indonesian rupiah from 9,472.00 rupiah and to Tw$30.09 from Tw$30.02.
The greenback also rose to 1,147.58 South Korean won from 1,141.38 won while staying unchanged at 42.03 Philippine pesos and 31.76 Thai baht.
The Australian dollar was at $1.0307 against $1.0314 while the Chinese yuan was almost flat at 12.22 yen.