Yen storms ahead as euro hit by Ireland downgrade

People are reflected in a stock quotation board outside a brokerage in Tokyo August 24, 2010.

SYDNEY (Reuters) - The yen was up near 15-year highs on the dollar and a nine-year peak on the euro on Wednesday as dismal U.S. data and a renewed slide in stocks sent investors scrambling for safe-havens.

The euro also took a hit when Standard & Poor's downgraded Ireland to AA- and warned the outlook was still negative, fanning worries about euro zone sovereign debt and the banking system.

Only fears of intervention restrained the yen as the Nikkei business daily reported Japan's Ministry of Finance might sell the currency if speculators drive it up too much.

The newspaper also reported the Bank of Japan was considering additional policy easing, though dealers suspect the central bank is highly reluctant to do anything really drastic.

The dollar sank as deep as 83.60 yen at one point, before crawling up to 84.25 on the intervention alert. The single currency fell as much as 2.2 percent to 105.44 yen, before steadying at 106.43.

"The overnight session was characterized by a rather sharp round of risk aversion that started late yesterday, gained momentum during the European session and became entrenched following shockingly soft U.S. data," said analysts at RBC Capital Markets.

"The yen and Swiss franc were the undisputed winners, with the Aussie and Canadian dollars making up the rear."

A 27 percent drop in existing U.S. home sales [ID:nN24249810] caused much of the damage, knocking the S&P 500 .SPX down 1.5 percent and sending Treasury yields to new lows <US/>.

The data were so bad they sparked talk the Federal Reserve could embark on a fresh round of quantitative easing, which seemed to tarnish the U.S. dollar's claim to be a safe haven.

A resulting wave of short-covering lifted the euro from a low of $1.2587 to as high as $1.2718 at one stage, before news of the Ireland downgrade dragged it back to $1.2635.

The euro fared less well on the Swiss franc, collapsing to a record low around 1.3015 francs compared to 1.3225 at the end of last week.

Traders were now waiting to see how far the Nikkei .N225 will fall, figuring the steeper the loss the more possible it was the Japanese authorities might finally bite the bullet and intervene.

(Reporting by Wayne Cole; Editing by Ed Davies)