* Dollar, yen advance as risk appetite retreats
* Euro falls across board on fiscal, growth worries
* Market wary before Fed meeting, U.S. debt auctions
(Recasts, adds quote, updates prices, changes byline)
By Nick Olivari
NEW YORK, June 22 (Reuters) - Investors' appetite for risk
fell on Monday, driving up the safe-haven U.S. dollar and yen
and dragging down riskier higher-yielding currencies after an
outlook by the World Bank stirred worries about global growth.
The euro came under added pressure and dropped near $1.38 as
a closely watched business climate survey in Germany, the euro
zone's largest economy, painted a mixed picture about Germany.
The World Bank said Monday that prospects for the global
economy remain "unusually uncertain," and it cut its 2009
growth forecasts for most economies. The U.S. and Japanese
currencies have tended to rise on extreme risk aversion in
recent months. See [].
"Risk aversion has resurfaced as market participants take
profits on riskier exposures," said Samarjit Shankar, director
of global foreign exchange strategy at the Bank of New York
Mellon in Boston. There are "renewed concerns about the extent
of the ongoing global recession and the sustainability of the
'green shoots' of recovery."
In midafternoon in New York, the euro was down 0.5 percent
at $1.3870 <EUR=> after hitting a session low of $1.3827,
according to Reuters data. On electronic trading platform EBS,
the low was 1.3826 <EUR=EBS>.
Data showed the German Ifo business climate index rose to
85.9 in June from 84.3 the previous month, beating forecasts of
85.2. The current conditions index, however, fell to 82.4 from
82.5, versus a forecast of 83.1. For more, see [].
Traders also cited concerns about Germany's widening budget
shortfall as an excuse to sell euros. Germany will raise its
net new borrowing target in 2010 to a record level that may
exceed 100 billion euros ($139 billion) as the country attempts
to battle the financial crisis. For details, see
[].
"Germany is the financial anchor of the euro zone. If there
are fiscal problems in Germany, all the other states in the
euro zone just crumble by the wayside," said Boris Schlossberg,
director of currency research at GFT Forex in New York. "That's
why the market is reacting so negatively."
Against the yen, the euro fell 1 percent to 132.85 yen
<EURJPY=EBS>, while the dollar dropped 0.5 percent to 95.80 yen
<JPY=EBS>, according to EBS.
The euro had briefly recovered some losses after European
Central Bank President Jean-Claude Trichet said on Monday that
he continued to see an economic recovery next year. Speaking in
Madrid, he said policymakers must remain alert despite initial
signs of a slowing in the pace of economic decline.
[].
FED MEETING
Moves in the foreign-exchange market were limited, with
investors awaiting the U.S. Federal Reserve's policy-setting
Open Market Committee meeting on Tuesday and Wednesday.
All eyes will be on the accompanying statement where the Fed
may offer clues about how it plans to exit from its recent
unconventional measures and whether it may extend its purchase
of U.S. Treasuries. The market is also expecting the central
bank to give a slightly brighter economic view.
"I think investors are hesitant to go into the meeting
overly short U.S. dollars," said Omer Esiner, senior currency
analyst at Travelex Global Business Payments in Washington.
"There's a potential that we could see a slight upgrade in
the Fed's assessment of the economy and perhaps some signs that
an exit strategy from the ultra-accommodative policies of the
Fed is being considered."
The Australian dollar fell 1.8 percent to $0.7902 <AUD=D4>
while the New Zealand dollar was down 1.7 percent at $0.6317
<NZD=D4>.
The fiscal situation in the United States will also be
closely watched this week with a record $104 billion in U.S.
Treasury debt to be auctioned.
(Reporting by Nick Olivari and Wanfeng Zhou; Editing by
Kenneth Barry)
