* Euro hits record low vs Swiss franc, 8 1/2-yr low vs yen
* High-yielding currencies tumble as investors pare risk
* Gloom over recovery grew on data on U.S., China, Japan
(Adds comments, details, changes byline)
By Wanfeng Zhou
NEW YORK, June 29 (Reuters) - The euro fell on Tuesday on
concerns about European banks' funding abilities, while the
dollar and yen gained as soft economic data from across the
globe cast doubts over the strength of economic recovery.
The euro hit an all-time low versus the Swiss franc and an
8 1/2-year trough against the yen. Interbank euro funding costs
rose to an eight-month high on fears the expiry of nearly half
a trillion euros of emergency loans this week may cause strains
for some banks. For details, see []
Uncertainty about the global recovery grew after data on
Tuesday showed a steep fall in U.S. consumer confidence, a
sharp downward revision to China's leading indicators index and
weakness in Japanese exports and unemployment. []
"The market is extremely sensitive to the fundamental data
that we're seeing right now," said Gareth Sylvester, senior
currency strategist at HiFX in San Francisco. "Any data that
would suggest a slowdown could be more prolonged, or the lack
of evidence to support the recovery sequence, is going to
create some nervousness."
Higher-yielding currencies such as the Australian and New
Zealand dollars sold off as concerns about the economy prompted
investors to pare back trades in riskier assets.
"Equity markets are down heavily today and that is being
translated into some U.S. dollar strength. All the risky
currencies like the Canadian dollar, the Aussie and Kiwi have
seen notably sell-offs versus the U.S. dollar," Sylvester said.
In afternoon trading in New York, the euro fell 0.6 percent
to $1.2200, after hitting a two-week low of $1.2152 <EUR=>,
according to Reuters data.
Technical analysts noted $1.2150 as a key level, saying a
break would open the way for a retest of the psychologically
important $1.2000 level and the pair's four-year low around
$1.1875 set on June 7.
The euro <EURJPY=R> was down nearly 1.4 percent at 108.12
yen after hitting a session low of 107.33 yen, its weakest
since late 2001. It fell to 1.3173 francs <EURCHF=> according
to Reuters data, the lowest since the euro's 1999 launch.
The franc has gained broadly since the Swiss National Bank
this month backed off its pledge to intervene in the currency
market to stem its strength. Comments from policymaker
Jean-Pierre Danthine on Monday bolstered this view.
LIQUIDITY SHORTFALL
Euro zone banks must repay 442 billion euros ($539 billion)
on Thursday borrowed a year ago at low rates as part of the
European Central Bank's efforts to boost liquidity. Investors
fear this could leave banks facing a liquidity shortfall.
European Central Bank officials scrambled to reassure
nervous markets. To offset the burden that banks will face in
paying back the money, the ECB has padded the date with extra
borrowing opportunities for them, including an offer of
unlimited three-month funds on Wednesday. See []
Europe's main barometer of investor anxiety, the VDAX-NEW
volatility index <.V1XI>, rose more than 10 percent, hitting
its highest level in three weeks.
The U.S. dollar index <.DXY>, which tracks the greenback
versus a basket of six major currencies, rose 0.4 percent to
86.037. Against the safe-haven yen, the dollar dropped 0.9
percent to 88.55 yen <JPY=>.
Lower U.S. government bond yields, with 10-year Treasury
yields <US10YT=RR> below 3 percent for the first time since
April 2009, also weighed on dollar/yen.
Traders also cited significant U.S. dollar short-covering
ahead of the monthly payrolls report on Friday that will
provide a key reading on the U.S. economy.
"It's not a good time to be long risk," said Douglas
Borthwick, head of trading at Faros Trading LLC, a full service
FX execution firm in Stamford, Connecticut.
"With month-end risk reduction, coupled with a touchy
number on Friday compounded by model accounts adding to risk
aversion trades, (today's) moves could be the tip of the
iceberg," Borthwick added.
(Additional reporting by Vivianne Rodrigues; Editing by Andrew
Hay)
