* Dollar slips to 3-week low vs yen
* Traders shun risky assets on fears about global economy
* Dollar up vs euro on safe-haven bid, ECB rate cut talk
(Recasts, adds comments, updates prices, changes byline,
dateline, previous LONDON)
By Wanfeng Zhou
NEW YORK, Jan 12 (Reuters) - The U.S. dollar fell to a
three-week low against the yen on Monday, as a grim view on the
global economy and a generally weaker tone in equities
worldwide prompted investors to shun riskier assets.
The euro was also under pressure on expectations
the European Central Bank will lower interest rates later this
week, and also as investors sought refuge in the relative
safety of dollar-denominated assets.
"Risk aversion is the predominant theme in the market this
morning -- that's clearly evidenced in the rise of the yen
across the board and the decline in higher yielding
currencies," said Omer Esiner, senior market analyst at Ruesch
International in Washington.
Global equities kicked off the week on a down note after
Friday's U.S. payrolls data showed the world's largest economy
lost more than one million jobs in the final two months of the
year. That, combined with a slew of recent dismal economic
reports from the euro zone and Britain, heightened fears of a
deepening global economic downturn.
The grim outlook was highlighted by European Central Bank
President Jean-Claude Trichet, who said on Monday that the
global economy will "slow down significantly in 2009" with the
industrialized economies having negative figures. Trichet made
the comments at a gathering of central bankers at the Bank for
International Settlements. For more, [].
In early New York trading, the dollar tumbled to a 3-week
low against the yen at 89.62 yen <JPY=>, according to Reuters
data, and last traded down 0.6 percent at 89.79 yen.
The euro also fell 0.7 percent against the yen to 120.38
yen <EURJPY=R>, having earlier hit a one-month low of around
120.09 yen.
"Global equities have sold off as a result of the darkening
outlook for the global economy and that has rekindled demand
for the relative safety of U.S. assets," said Ruesch's Esiner.
"At the same time, expectations for an euro zone rate cut on
Thursday are undermining the euro."
The euro fell 0.2 percent against the dollar to $1.3409
<EUR=>.
The higher-yielding Australian dollar lost 2.5 percent
versus the U.S. dollar to US$0.6858 <AUD=> and fell 2.3 percent
against the yen <AUDJPY=> to 61.55 yen, weighed down by risk
aversion and lower commodity prices.
Sterling was also sharply lower, dropping 1.9 percent
against the dollar <GBP=> to $1.4884. The pound also fell 2.2
percent against the yen at 133.50 yen <GBPJPY=R>
ECB EYED
Data last week showed factory output collapsing across
Europe, raising the prospect for a sharp economic downturn and
increasing expectations for a large rate cut when the European
Central Bank meets to decide policy on Thursday.
Such sentiment was echoed by IMF Managing Director
Dominique Strauss-Kahn, who said in a media interview on Monday
that Europe was "behind the curve" on taking economic stimulus
measures and he expected interest rates to decrease further in
Europe [].
Markets expect the ECB to cut key interest rates by 50
basis points to 2.0 percent, according to a recent Reuters
poll. Interest rate futures on Monday showed they expected a 75
basis point cut, and some chancing a full one percentage point
move <ECBWATCH>.
"The fear amongst many observers is that by delaying the
inevitable the ECB may exacerbate the economic slowdown in the
region creating a disastrous contraction in demand," said Boris
Schlossberg, director of currency research at GFT Forex in New
York.
"Irrespective of this week's decision, the market is
beginning to price in 100 basis points rate cuts this year and
that dynamic could weigh on euro/dollar in the near term."
(Additional reporting by Tamawa Desai in London; Editing by
Chizu Nomiyama)
