* Euro up on cen banks' comments; Yen falls after PM resigns
* World stocks ease, extending May's nearly 10 pct drops
By Dominic Lau
LONDON, June 2 (Reuters) - The euro rose on Wednesday after
some of the world's biggest central banks said they would not
stop investing in the single currency, while world equities and
commodity prices fell.
The yen and Tokyo's shares weakened following Japan's Prime
Minister Yukio Hatoyama's resignation.
Official sources in Brazil, India, Japan, Russia and South
Korea told Reuters in separate interviews that due to the
liquidity of the dollar and the euro and the difficulty of
shifting such large portfolios, there were no alternatives to
the two currencies in the near term. []
The euro <EUR=> steadied at $1.2228 after rising to around
$1.2249 following the news.
The euro is down more than 14 percent against the dollar
this year on fears stemming from Greece's sovereign debt problem
and possible contagion risks which sparked a sell-off in
financial markets around the world.
The weakness in the single currency has raised concerns
whether central banks around the world, especially those surplus
rich countries, will trim their holdings of the euro.
The U.S. currency advanced 0.7 percent to 91.61 yen <JPY=>
as investors sold on the view that political instability would
make the economy more dependent on the Bank of Japan and its
easy monetary policy.
"The big theme is still one of a weak and vulnerable euro.
Very few investors are ready to put on long euro/dollar
positions, and any spikes are due to profit-taking on short
positions," said Niels Christensen, currency strategist at
Nordea in Copenhagen.
"The political situation in Japan could give a reason for
brief yen selling, but it is likely to be limited because risk
aversion is still very much on the table."
YEN, NIKKEI DOWN
Tokyo's Nikkei average <> fell 1.1 percent, unsettled
by the resignation of Hatoyama and his powerful No. 2.
World stocks measured by the MSCI All-Country World Index
<.MIWD00000PUS> slipped 0.6 percent, on the back of weaker
markets in Asia and Europe. The index fell nearly 10 percent
last month, its worst monthly loss since February 2009.
In Europe, the FTSEurofirst 300 <> index lost 0.8
percent, with oil major BP <BP.L> falling 1.8 percent to extend
the previous session's 13 percent slump.
The U.S. government has launched a widely expected criminal
and civil investigation into BP's massive oil spill, ratcheting
up pressure on the beleaguered British oil company.
Bund futures <FGBLc1> rose as equities opened lower and risk
appetite ebbed, while investors awaited a Portuguese treasury
bill auction seen as an important gauge of demand for peripheral
euro zone debt.
Portugal sells up to 750 million euros of three-month
T-bills at auction later in the day which, given the European
Central Bank's intervention in longer-dated bonds, should give a
clearer picture of investor demand for the country's debt.
Portuguese bonds' "relatively good performance versus the
bigger peripherals bodes well, so although the T-bill auction
will be scrutinised by the market, it should go through. From
our perspective there's no risk of a buyers' strike," said David
Schnautz, strategist at Commerzbank in Frankfurt.
The 10-year German bond yield <EU10YT=RR> was down 1.7 basis
points at 2.664 percent while the two-year Schatz yield
<EU2YT=RR> was all but flat at 0.490 percent.
In the commodity market, crude prices <CLc1> dipped 0.2
percent to trade above $72 a barrel, and copper prices <MCU3>
eased 1.8 percent.
(Editing by Ron Askew)
(Additional reporting by Jessica Mortimer and William James)
