Dollar sinks on fears over US economy
The dollar suffered fresh losses against the yen and hit a record low against the euro in Asian trade Monday as concerns about the US economy sparked another rout on global stock markets, dealers said.
The euro shot higher after top world finance chiefs refrained from voicing increased concern about currencies at their meeting on Friday, which dealers took as a green light to drive the greenback down to fresh lows.
The dollar fell to 114.06 yen in Tokyo afternoon trade from 114.53 in New York late on Friday as speculators unwound risky "carry trade" bets that involve selling the Japanese currency to buy higher-return assets.
The euro rose to as high as 1.4347 dollars before easing back to 1.4323 by mid-afternoon trade here. The euro fell to 163.34 yen from 163.76.
"The dollar-selling pressure is largely based on general concerns about the US economy," said Yosuke Hosokawa, head of forex at Chuo Mitsui Trust Bank.
"Friday's decline in US stocks reignited concerns and sparked another wave of dollar selling," Hosokawa said.
The dollar dropped to as low as 113.27 yen as the renewed falls on global stock markets undermined investor risk appetite and prompted an unwinding of carry trades, dealers said.
"Yen-buying sentiment may continue for the time being as players are trying to avoid potential risk," Hosokawa said.
The Group of Seven finance chiefs said the functioning of financial markets was improving after recent market upheavals, and refrained from voicing increased concern about currencies.
The G7 statement "gave the green light to further dollar depreciation," noted analysts at Barclays Capital.
There had been some concern that European politicians might push for steps to try to prop up the dollar given the negative impact of a stronger euro on eurozone exporters.
But the finance chiefs only reiterated that exchange rates "should reflect economic fundamentals" and that excess volatility is undesirable for economic growth.