* Dollar gains broadly, euro at lowest in more than 2 months
* Moody's says east European crisis weighing on bank ratings
* Yen slips after Japan's finance minister says to quit
* Eyes also on U.S. automakers' restructuring plans
By Charlotte Cooper
TOKYO, Feb 17 (Reuters) - The dollar rose across the board on
Tuesday and the euro hit its lowest in more than two months,
pressured by concerns about a recession in eastern Europe and the
knock-on effect on European banks.
The yen slipped after Japan's finance minister said he would
resign following criticism of his behaviour at a weekend Group of
Seven news conference in Rome.
Credit rating agency Moody's said the recession in emerging
Europe was likely to be more severe than elsewhere and would put
financial strength ratings of local banks and their Western
parents under pressure, fuelling simmering investor jitters about
the region. []
The report stoked euro selling which, along with investor
risk aversion, helped propel the dollar higher against the yen
and other major currencies.
"There's a lot of focus on this in Asia. We're seeing that
develop into pressure on the euro," said Mitul Kotecha, global
head of FX strategy at Calyon in Hong Kong.
"It's not new news, but it seems to be intensifying as a
focus for Europe and the European institutions."
Moody's said the combination of higher provisions for bad
debt, the rise in bank borrowing costs and falling currencies
would weigh on the profitability of the banks concerned and erode
their capital base.
Western European banks led by UniCredit <CRDI.MI>, Erste
Group Bank <ERST.VI>, Raiffeisen International <RIBH.VI> and
Societe Generale <SOGN.PA> have bought up most of emerging
Europe's banking sector in recent years to tap the rampant credit
growth that fuelled the region's boom.
U.S. markets were closed for a holiday on Monday, when the
euro lost about half a percent against the dollar and 0.8 percent
against the yen as European equities fell.
The euro dropped as low as $1.2632 <EUR=> on Tuesday, its
lowest since early December on trading platform EBS, down 1.3
percent.
The euro fell 0.3 percent to 116.89 yen <EURJPY=R>.
RISK AVERSION
The European currency was also under pressure from growing
expectations for a deeper cut in interest rates by the European
Central Bank in March. Many now expect rates to fall to a record
low of 1.5 percent.
ECB President Jean-Claude Trichet said on Monday the economic
situation was extremely difficult but policymakers must avoid
laying the ground for future disorder but another ECB official
described the outlook for 2009 as "dismal".[]
Asian stock markets fell, adding to the climate of risk
aversion, with Tokyo's Nikkei average <> ending down 1.4
percent at its lowest in nearly four months as banks and property
shares came under pressure. []
The yen briefly weakened to its lowest in more than a month,
at 92.75 per dollar <JPY=>, after Japanese Finance Minister
Shoichi Nakagawa said he would resign after being forced to deny
he was drunk at a G7 news conference. []
Nakagawa said he intended to resign after the government's
budget was passed by the lower house of parliament, though he
many not last even that long, according to a number of analysts.
Japanese Prime Minister Taro Aso is leaning towards
appointing Economics Minister Kaoru Yosano to succeed Nakagawa,
Kyodo news agency reported. []
The dollar gained 0.8 percent to 92.48 yen <JPY=>.
"The euro's weakness has been a focal point in the forex
market, and the Japanese currency is unlikely to steal the
spotlight," said Daisuke Uno, chief strategist at Sumitomo Mitsui
Banking Corp.
Analysts said currency markets were also looking to a Tuesday
deadline for U.S. car giants General Motors Corp <GM.N> and
Chrysler LLC <CBS.UL> to submit turnaround plans showing how they
can be made viable after receiving $13.4 billion in emergency
aid. []
(Additional reporting by Rika Otsuka and Kaori Kaneko; Editing
by Hugh Lawson)
