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Euro slips vs dollar, yen hit by bleak data

TOKYO: The euro slipped against the dollar in late afternoon trade in Tokyo on Tuesday, as the market braced for a further drop in the European currency after it tumbled to a record low the previous day.

The dollar also rose against the yen on month-end commercial demand and weak Japanese economic data released early in the day.

The dollar was quoted at 110.08/16 yen in late Tokyo trade, up from 109.48 yen in New York late on Monday.

The euro, which tumbled 3.5 percent from its intraday high to a record low of $0.9390 in Tokyo on Monday, was quoted at $0.9680/84 down from $0.9717 in New York late on Monday.

The euro briefly rose as high as $0.9727 in the early afternoon, helped by buy-backs against the yen that pushed the single European currency as high as 107.32 yen.

But the euro's rise was short-lived, as selling by Japanese exporters and investors quickly knocked it back below 107 yen, dealers said.

The euro was quoted at 106.54/62 yen compared with 106.36 yen in New York late on Monday.

On Monday, the euro dropped more than five yen in Tokyo to a low of 102.45 yen, less than a half yen away from its all-time low of 102.05 yen set on December 6.

"After seeing the euro plunge (on Monday) during lunchtime here, euro bears are not taking any chances. They probably will continue to sell euros above 107 yen," said a dealer at a Japanese city bank.

Dealers said the euro was vulnerable, but another sharp drop was unlikely ahead of the European Central Bank's (ECB) policy-setting council meeting on Thursday. "The chance of an interest rate rise at this week's ECB council meeting is probably still slim. But the risk of a surprise was one factor encouraging people to buy back euros today," said a dealer at a Japanese trust bank.

A Reuters poll of 33 European economists conducted between on February 24 and 28 showed that the majority expected the ECB to raise interest rates in March or April, but only three were convinced that the move would come as soon as this on Thursday.

"The euro is likely to eventually test $0.9000, as last night's comments by European officials showed no change in their laissez-faire currency policy," the trust bank dealer said.

Italian Treasury Minister Giuliano Amato said overnight there had been no calls for intervention to prop up the euro at a meeting of euro-zone finance ministers on Monday.

Bundesbank Vice-President Juergen Stark, when asked to comment on the euro's performance, told Reuters on Monday that the ECB should not react to short-term developments.

"Europe seems to be even enjoying the fall in the euro, and as a basic stance they are not expected to intervene in the market or comment on euro levels," said Sadaaki Tsunakawa, foreign exchange manager at Citibank NA in Tokyo. Japanese investors and exporters were detected selling dollars for yen, but the greenback retained a firm tone as Japanese economic data released on Tuesday offered a less-than-rosy outlook for the Japanese economy.

Japan's seasonally adjusted industrial output rose a preliminary 0.9 percent in January from the previous month. That was lower than a consensus forecast of a 3.0 percent rise in a Reuters survey last on Friday.

Spending by Japanese wage earners' households fell a real 3.0 percent in January from a year earlier, while Japan's unemployment rate stood at 4.7 percent in January, remaining near its record high of 4.8 percent.

"Today's Japanese economic data suggested there are no fundamental, justifiable reasons now to buy yen aggressively," said a dealer at a Japanese city bank.

Dealers said no leap year-linked technical glitches were detected in the currency market on Tuesday.

"The usual month-end dollar buying by corporate clients kept us busy this morning. We did not notice any leap-year factors disrupting activity," the city bank dealer said.

Currency bid prices. All data taken from Reuters with percent change calculated from the daily US close. A Reuters poll of 33 European economists conducted between February 24 and 28 showed that the majority expected the ECB to raise interest rates in March or April, but only three were convinced that the move would come as soon as this on Thursday.

"The euro is likely to eventually test $0.9000, as last night's comments by European officials showed no change in their laissez-faire currency policy," the trust bank dealer said.

Italian Treasury Minister Giuliano Amato said overnight there had been no calls for intervention to prop up the euro at a meeting of euro-zone finance ministers on Monday.

Bundesbank Vice-President Juergen Stark, when asked to comment on the euro's performance, told Reuters on Monday that the ECB should not react to short-term developments.

"Europe seems to be even enjoying the fall in the euro, and as a basic stance they are not expected to intervene in the market or comment on euro levels," said Sadaaki Tsunakawa, foreign exchange manager at Citibank NA in Tokyo. Japanese investors and exporters were detected selling dollars for yen, but the greenback retained a firm tone as Japanese economic data released on Tuesday offered a less-than-rosy outlook for the Japanese economy.

Japan's seasonally adjusted industrial output rose a preliminary 0.9 percent in January from the previous month. That was lower than a consensus forecast of a 3.0 percent rise in a Reuters survey last on Friday.

Spending by Japanese wage earners' households fell a real 3.0 percent in January from a year earlier, while Japan's unemployment rate stood at 4.7 percent in January, remaining near its record high of 4.8 percent.

"Today's Japanese economic data suggested there are no fundamental, justifiable reasons now to buy yen aggressively," said a dealer at a Japanese city bank.

Dealers said no leap year-linked technical glitches were detected in the currency market on Tuesday.

"The usual month-end dollar buying by corporate clients kept us busy this morning. We did not notice any leap-year factors disrupting activity," the city bank dealer said.Currency bid prices. All data taken from Reuters with percent change calculated from the daily US close-Reuters