* Yen rallies, high-yielders fall on deleveraging
* Risk aversion remains despite Citi rescue
* Weak German Ifo underlines struggling euro zone economy
(Changes dateline, byline, adds comment, updates throughout;
previous HONG KONG)
By Naomi Tajitsu
LONDON, Nov 24 (Reuters) - The yen climbed on Monday while
higher-yielding currencies stumbled, as investors continued to
dump risky assets after news of a U.S. government rescue plan
for Citigroup did little to convince the market that the end of
the financial crisis is near.
Market participants applauded the U.S. government's $300
billion lifeline to prevent the collapse of the world's largest
banking group, [] but analysts said ongoing concerns
about a global recession would keep the broad deleveraging trend
intact.
"The Citigroup plan is a good thing in the sense that its
good for financial stability, but concerns still remain about
the state of the global economy and the state of the financial
system worldwide," said Chris Gothard, currency analyst at Brown
Brothers Harriman in London.
"The trend over the last couple of months has been dollar
and yen strength mainly due to investor caution and
deleveraging. We don't really see that changing."
The euro <EUR=> briefly slipped as low as $1.2568, pressured
as ongoing deleveraging of risky assets kept the single European
currency on the back foot. By 1010 GMT, it was up 0.6 percent at
$1.2660.
The euro pulled back, having also come under some early
selling pressure after a weak reading for the German business
climate underlined weakness in the German economy and kept
expectations high for cuts in euro zone interest rates [].
The Munich-based Ifo economic research institute said that
its business climate index declined to 85.8 in November from
90.2 in October, hitting its lowest since February 1993. The
reading was weaker than forecasts a 88.7 reading.
Analysts said that the figure reminded the market that the
euro zone is in a recession and kept expectations intact that
the European Central Bank will have to keep cutting interest
rates.
"(The reading) was truly awful and suggests that the fall in
output in the euro zone's largest economy gained both momentum
and traction in the fourth quarter," said Tom Vosa, head of
market economics at nabCapital in London.
"The sharp slowdown seen in Germany and elsewhere will put
pressure on the ECB to cut rates aggressively," he said, adding
that the ECB may cut rates by 75 or even 100 basis points from
3.25 percent next month.
Against the yen <EURJPY=R>, the euro hit a session low of
119.58 yen before recovering to around 120.77 yen, little
changed on the day.
An early climb in European shares, which cheered the Citi
news by rising 3.8 percent <>, helped to provide a boost
to the euro, but investors remained extremely wary about taking
on risk.
AUSSIE, KIWI SLIDE
The dollar <JPY=> fell 0.6 percent to 95.24 yen, as
investors continued to flock to the low-yielding Japanese
currency after shedding positions in higher-yielding ones in an
ongoing reversal of the carry trade.
Some in the market said that the dollar/yen losses were
limited by news that U.S. President-Elect Barack Obama will
nominate New York Federal Reserve Bank President Timothy
Geithner and former Treasury Secretary Lawrence Summers as his
top economic lieutenants.
Once lauded for their high yields, the Australian and New
Zealand dollars continued to suffer on Monday, having dropped in
tandem with falling shares, due to investors' unwillingness to
hold risk.
The Aussie dollar <AUD=> fell 0.1 percent to $0.6296 and
hovered in range of a 5 1/2-year low near $0.6007 hit a month
ago. Against the yen, it tumbled nearly 1 percent to 60.04 yen
<AUDJPY=R>.
The New Zealand dollar <NZD=> fell half a percent to
$0.5322, staying near a six-year low of $0.5190 hit late last
week. It fell 2.2 percent to 50.53 yen <NZDJPY=R>.
Sterling <GBP=> was little changed at $1.4870, as market
participants awaited the UK government pre-budget report due
later in the day.
(Additional reporting by Veronica Brown; Editing by Toby
Chopra)
