* Greek debt woes fuel risk aversion
* Yen gains broadly, hits one-year high versus euro
* Analysts eye further yen strength into fiscal year-end
(Adds detail, comment, updates throughout)
By Neal Armstrong
LONDON, Feb 25 (Reuters) - The euro hit a one-year low
against the yen on Thursday as persistent worries over Greece's
fiscal position fuelled risk aversion, prompting safe-haven
flows into the low-yielding Japanese currency.
Worries over a possible downgrade of Greece's sovereign debt
were seen as the trigger, after ratings agency Standard and
Poor's said late on Wednesday it may cut Greece's BBB+ rating by
one or two notches within a month.
Concerns over Greece and other peripheral euro zone
countries' ability to pay their debts have driven the euro down
more than 10 percent from its December highs.
The Greek government has proposed spending cuts, prompting
tens of thousands of Greeks to strike in protest on Wednesday.
The low-yielding yen was the main beneficiary in Asian trade
as risk aversion fuelled a rally in the Japanese currency.
"The yen is in favour against the euro on safe-haven demand,
fuelled by risk-aversion on concerns over sovereign debt risks
of the peripheral euro zone members. A possible Greek ratings
downgrade has added further pressure." said Lee Hardman,
currency strategist at BTM-UFJ.
At 1045 GMT, the euro was down around 1.3 percent at 120.60
yen, close to one-year lows of 120.21 hit in late Asian trade.
Traders said large option barriers positioned at 120.00 could
curb the yen's strength, adding that significant stop-loss
orders were lurking below.
Versus the dollar, the euro initially dropped back below
$1.3500 and came close to a nine-month low of $1.3445 hit on
Friday. It recovered back to 1.3510 in European dealing, aided
by Asian sovereign demand.
Higher-yielding currencies such as the Australian and New
Zealand dollars also came under heavy pressure versus the yen as
traders said Japanese margin accounts were forced into stop-loss
driven selling.
The Australian dollar was down more than 1 percent at 79.50
yen, after dropping to 79.17 into European trade. Technical
traders noted it had broken below its 200-day moving average at
79.78.
Sterling tumbled to a nine-month low against the yen as
worries over the UK economy weighed on the pound.
The yen also gained close to 1 percent against the dollar,
though technical traders noted strong support around the day's
lows from the base of the Ichimoku Cloud. Japanese bids were
noted supporting under 89.30.
"The yen does tend to strengthen when times get tough and I
would also say it is likely to remain in favour going into the
Japanese fiscal year-end", said HSBC director of currency
strategy Paul Mackel.
BTM's Hardman agreed, noting Japanese corporates
traditionally repatriate overseas' revenues back to their
domestic currency going into the end of the fiscal year on March
31.
The dollar gave back earlier gains versus a basket of
currencies to trade flat on the day at 80.837. It had slipped
back on Wednesday after Federal Reserve Chairman Ben Bernanke
told Congress a weak jobs market and low inflation would likely
allow the Fed to keep rates low for "an extended period".
That poured cold water on market expectations that U.S.
interest rates would rise sooner rather than later -- a view
boosted after the Fed raised its discount rate last week.
(Editing by Susan Fenton)
