(Changes dateline, byline, recasts)
By Toni Vorobyova
LONDON, Feb 11 (Reuters) - Worries about the health of the
global economy, highlighted at the weekend's meeting of Group of
Seven, boosted the yen on Monday, while the euro benefited from
hawkish policymaker comments.
European Central Bank President Jean-Claude Trichet stressed
that there was no call to move rates up or down at last week's
policy meeting while Governing Council member Axel Weber told a
German newspaper the ECB had not relaxed its view on inflation
risks.
The comments seemed to be aimed at toning down markets'
interpretation last week that the ECB was opening the door for
future monetary easing by dropping wording about pre-emptive
action against inflation while warning of downside growth risks.
The euro clawed back some of the previous week's losses, but
money markets were still pricing in nearly 100 basis points of
easing by year-end.
Another positive for the euro came from comments by OPEC
Secretary General Abdullah al-Badri over the weekend that OPEC
may switch to pricing oil in euros rather than dollars.
"Every time that story hits the wires, we get a knee-jerk
reaction in euro higher, but if you look at the details, there
are no immediate plans, so I don't expect it (currency reaction)
to last very long," said Adam Myers, market strategist at Credit
Suisse.
By 0831 GMT, the euro was up 0.4 percent at $1.4564 <EUR=>.
But that erased only a fraction of last week's 2 percent slide
-- the currency pair's biggest weekly fall in 1-1/2 years.
The euro fell a third of a percent to 155.23 yen <EURJPY=>,
while the dollar was down 0.7 percent at 106.59 yen <JPY=>.
The Japanese currency benefited from a risk averse mood,
with worries about global growth and falling equity markets
prompting currency investors to exit risky carry trade bets
funded by cheap borrowing in the yen.
G7 finance leaders, meeting in Tokyo, said the crumbling
U.S. housing market had wounded the world economy and conditions
may worsen as debt-laden banks clamp down on credit.
"One message that came out of the G7 statement over the
weekend is that global growth is expected to slow, and it will
be a much broader slowing than originally anticipated, so that
should benefit the yen," said Myers at Credit Suisse.
On currencies, the G7 largely repeated the language in the
previous statement, saying that exchange rates should reflect
economic fundamentals. But they tweaked comments on China's yuan
to say "we encourage" the need for greater appreciation of the
currency instead of "we stress", which was used last time.
HAWKISH RBA HELPS AUSSIE
The Australian dollar firmed as the central bank warned it
would likely need to raise interest rates again to restrain
quickening inflation, even as it reduced its growth forecasts.
The Australian dollar <AUD=> rose 0.9 percent to a one-week
high of US$0.9043, supported by growing market expectations the
central bank will raise rates again at its meeting in March,
after boosting them to an 11-year peak of 7 percent last week.
The Reserve Bank of Australia raised its inflation forecasts
in a policy statement on Monday, saying it saw considerable risk
that inflation would remain uncomfortably high.
"The RBA's (statement) ... was hawkish and suggests that a
follow up rate hike in March and possibly beyond cannot be ruled
out unless domestic demand starts to show some signs of
moderation," RBC Capital Markets said in a note, recommending
long bets on the Australian dollar versus its New Zealand
counterpart <AUDNZD=R>.
Monday's data calendar is relatively light, but a meeting of
EuroGroup finance ministers in Brussels may yield some comments
on currencies, interest rates or the economy.
(Editing by Mike Peacock)
