* Sterling hits record low vs euro, 2-year low vs dollar
* Traders cite UK finmin's comments in Guardian on Saturday
* Darling says UK econ downturn may be worst for 60 years
* Yen hits 4-mth high vs euro, 5-mth high vs sterling
By Masayuki Kitano
TOKYO, Sept 1 (Reuters) - Sterling fell versus the dollar to
its lowest level in more than two years and slid to a record low
against the euro on Monday, after Britain's finance minister said
the country's economic downturn might be the worst in 60 years.
The dollar approached an eight-month high against a
trade-weighted basket of currencies <.DXY>. The yen jumped to a
five-month high vs sterling and a four-month peak against the
euro, and also rose against the Australian and New Zealand
dollars <AUDJPY=R> <NZDJPY=R>.
Gerrard Katz, head of North Asia FX trading at Standard
Chartered in Hong Kong, said the market's volatility was due to
stop-loss selling in a variety of sterling pairs, along with
euro/yen and some others.
"Certainly no one's rushing to buy cable at the moment," Katz
said. "There was a lot of weekend press about how bad the UK
economy is at the moment, so that's weighing on the market."
The pound fell more than one percent versus the dollar at one
point following the comments by Chancellor of the Exchequer
Alistair Darling, which were printed in the Guardian newspaper on
Saturday. []
Darling said in an interview that Britain's economic downturn
is likely to be deeper and last longer than originally feared.
Sterling fell to as low as $1.8005 <GBP=D4>, its lowest level
since April 2006. It later trimmed some losses to stand at
$1.8047 for a decline of 0.9 percent on the day.
STERLING'S WEAKNESS
The pound slid to 81.39 pence to the euro <EURGBP=D4> on the
Reuters dealing system, the lowest for sterling since the single
European currency was launched in 1999.
Sterling also hit a five-month low of 195.15 yen <GBPJPY=R>.
"Even with a U.S. holiday it could be an interesting day,"
said a trader for a European bank. U.S. markets will be closed on
Monday for the Labor Day holiday.
Sterling extended its losses after falling more than 8
percent against the dollar in August in its biggest drop since it
crashed out of the Exchange Rate Mechanism in 1992.
While the Bank of England is seen likely keeping interest
rates on hold at 5.0 percent at a two-day policy meeting that
ends on Thursday, sterling has been hurt by speculation that the
central bank may lower interest rates later this year.
"It is hard to buy the pound and the dollar is favoured
comparatively as a result," said a trader for a European bank.
The dollar index rose 0.4 percent to 77.504 <.DXY>. A rise
above 77.619 would take the index, which measures the dollar's
value against a basket of currencies, to an eight-month high.
The dollar has rallied broadly over the past month,
benefiting from signs that the U.S. economy's weakness was
spreading to other major economies.
The euro fell 0.2 percent to $1.4640 <EUR=>. A fall in the
euro to below $1.4570 would take the single European currency to
its lowest level since mid-February.
Against the yen, the euro fell as low as 158.42 yen
<EURJPY=R> on trading platform EBS to its lowest in more than
four months, partly due to Japanese exporter selling, said a
trader for a Japanese bank.
The yen gained against Australian dollar and New Zealand,
helping to drag the dollar lower against the Japanese currency
despite the greenback's broad rise. The dollar dipped 0.3 percent
to 108.46 yen <JPY=>.
"As the global slowdown spreads and weighs on equities
markets, risk aversion will likely support the yen," said Hideki
Hayashi, chief economist at Shinko Securities.
The Nikkei stock average <> fell 1.6 percent and Asian
stocks fell broadly, following a tumble in U.S. stocks.
(Additional reporting by Eric Burroughs and Chikako Mogi;
editing by Sophie Hardach)
