* Dlr hits 13-mth highs vs euro; euro/yen at 2-1/2 year
trough
* Lack of coordinated European bank plan hits confidence
* Yen soars across board, Aussie/yen sinks 5 pct
(Adds quotes, updates prices, changes byline, changes
dateline, previous LONDON)
By Wanfeng Zhou
NEW YORK, Oct 6 (Reuters) - The U.S. dollar jumped to a
13-month high against the euro on Monday, while the yen rallied
across the board as fears over bank problems in Europe deepened
and investors cut risk exposure.
Sentiment worsened sharply against the euro after leaders
of Europe's four biggest economies decided against a
coordinated bailout plan at a weekend summit.
"The market is shunning the euro. The banking crisis (in
Europe) seems to have taken the spotlight over the U.S. and the
failure for European officials to come to an agreement on a
coordinated type bailout weighed on the euro," said Ronald
Simpson, director of global currency analysis at Action
Economics in Tampa, Florida.
In early trading in New York, the euro was down 1.4 percent
at $1.3577 after sliding to its lowest since late August 2007
at $1.3542 <EUR=>, according to Reuters data.
Against the yen, the euro was down 3.6 percent at 139.88
yen, after falling to 139.82 earlier -- a 2-1/2-year low
<EURJPY=>.
"For the short-term at least, it looks like the dollar is
maintaining its role as a safe haven despite the problems that
we're having here," Simpson said. "The direction for the euro
is still lower in the near term."
European banks have been hit hard by the fallout from a
crisis that began in the United States when the housing market
collapsed and bad mortgage debts multiplied.
In the European stock market, banking shares led share
prices down 5 percent on the day. Sweden became the latest
country to act against the deepening crisis, with the
government saying it would expand bank deposit guarantees and
the central bank raising the amount of loans offered to banks.
It followed Germany's pledge on Sunday to guarantee private
deposit accounts, a move which spurred similar action by
Austria and Denmark. Ireland issued the first such guarantee
last week, prompting criticism of a fragmented European Union
response.
The moves in Europe were in contrast to the situation in
the United States, where the government's $700 billion bank
rescue plan was finally passed by Congress on Friday.
"Foreign investors had a love affair with the euro zone up
until late last year. If you have an uncoordinated policy
response it gives even less reason to invest in the euro zone
and that is helping encourage these flows," said Chris Turner,
head of FX strategy at ING in London.
The dollar was also helped by strong dollar demand as
global money markets remain frozen, analysts said.
The ICE Futures U.S. dollar index, which tracks the
greenback against a basket of six major currencies, rose 0.5
percent to 81.305 <.DXY>. It earlier rose to 81.436, a 13-month
high.
RISK AVERSION BOOSTS YEN
The yen soared across the board as more worries about the
troubles plaguing the global financial system prompted heavy
selling of riskier positions in carry trades and stocks.
The dollar was down more than 2 percent to 103.03 yen
<JPY=>. Earlier, it fell to a low of 102.86, the lowest in
about 4-1/2 months.
The Australian dollar <AUDJPYR> plunged more than 5 percent
percent against the yen at one point to a four-year low as
investors were forced to dump long-standing carry trades
favouring higher-yielding currencies.
"Risk aversion trades re-entered the market in a powerful
way after the German government showed little understanding of
how to deal with the banking crisis," currency strategists at
BNP Paribas write in a research note.
"With the root cause of the problem unlikely to be tackled
anytime soon, risk aversion will continue to be the key theme
in the market," they said.
(Additional reporting by Veronica Brown in London; Editing by
Chizu Nomiyama)
