By Masayuki Kitano
TOKYO, Jan 21 (Reuters) - The dollar rose broadly and hit a
one-month high against the euro on Monday as investors fretted
whether major economies would be able to decouple from the
slowing U.S. economy.
The euro was hit by short-covering in the dollar and slid to
a four-month low against the yen, hurt by ongoing concerns that
euro zone economies may weaken more than expected this year.
Sterling fell after property Web site Rightmove on Monday
said that annual house price inflation in England and Wales this
month hit its lowest since December 2005, adding to the view that
the British housing market may weaken, and hurt the economy.
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"Up until recently there had been an argument that even if
the U.S. economy performed poorly, there would be a decoupling
and other countries would be alright," said Taisuke Tanaka,
foreign exchange strategist for Lehman Brothers.
"But at a time when the outlook for the U.S. economy keeps
worsening, it is becoming clear that it's not easy to say that
countries other than the United States are holding up firmly,"
Tanaka said.
The euro fell as low as $1.4533 <EUR=> on electronic trading
platform EBS, its lowest since late December. It stood at $1.4541
as of 0507 GMT for a decline of 0.5 percent on the day.
The euro fell as low as 155.16 yen <EURJPY=R> on EBS, its
weakest against the Japanese currency in four months.
The dollar held steady against the yen, and stood at 106.76
yen <JPY=>, little changed from late U.S. trading on Friday.
The single European currency extended losses from last week,
when a European Central Bank official said economic growth in the
region could slow more than expected this year, while other
central bank board members said inflation remains a key issue.
RISK AVERSION
Sterling fell slightly to $1.9515 <GBP=D4>, edging back
towards a 10-month low of $1.9483 hit earlier this month.
"Until now the United States has been bearing the brunt of
weak data, but data in other countries also isn't great," said
the vice president of foreign exchange sales for a European bank,
adding that other currencies were starting to come under selling
on signs of weakness in their respective economies.
"What's happening is not so much a question of selling or
buying the dollar," he added. "Instead, I think the consensus now
is to avoid taking risk as much as possible."
The Australian dollar slid 0.5 percent to 93.41 yen
<AUDJPY=R>, dragged lower as the country's stock market fell 2.9
percent as investors continued to dump equities for safe-haven
investments on worries about the global economy.
The Australian dollar also edged lower after data showed a
smaller-than-expected rise in Australia's producer prices,
somewhat easing the risk of an interest rate hike early next
month. []
"The risk reduction issue remains a big theme in the market,"
said a trader at a Japanese bank.
He said that given plunging stock markets, the yen had more
room to gain in the near- to mid-term as investors continue to
dump risky positions in high-yielding currencies that were funded
using the low-yielding Japanese currency.
Regional shares fell broadly, with Japan's Nikkei share
average slumping 3.7 percent <>.
The Bank of Japan starts a two-day policy meeting on Monday,
and investors are awaiting comments from BOJ Governor Toshihiko
Fukui when it ends to see how he addresses growing speculation of
an interest rate cut as early as mid-year.
(Additional reporting by Naomi Tajitsu)
