* German Ifo falls short of forecast
* Comments from ECB's Draghi, Nowotny weigh on euro
* Concerns on U.S. govt shutdown could come under spotlight
* Kiwi falls after jump in trade deficit
By Hideyuki Sano
TOKYO, Sept 25 The euro was on the defensive on
Wednesday following weaker-than-expected German sentiment data,
while worries over a possible U.S. government shutdown
underpinned the yen against the dollar.
Traders, wrong-footed by last week's shock decision by the
U.S. Federal Reserve to keep its bond-buying stimulus intact,
also remain cautious and on data-watch mode as they consider for
how long the U.S. central bank could hold off from tapering.
That uncertainty over the Fed's outlook and comments on
Monday from European Central Bank President Mario Draghi that
the bank was ready to provide more long-term loans to keep
money-market rates from rising have kept the dollar and euro
Draghi's message was reinforced on Tuesday by Ewald
Nowotny, a member of the ECB Governing Council, who said that it
was too soon for the bank to go into exit mode from its crisis
The single currency faced more selling pressure overnight
after data from the Ifo think tank on Tuesday showed that German
business morale improved slightly in September to touch a
17-month high, but the index fell short of the consensus
"It seems like an improvement in the euro zone economic data
has stalled. In addition, now that Germany's election is over,
the market could dust off the issues that had fallen out of
focus, such as further aid to Greece," said Masafumi Yamamoto,
forex strategist at Praevidentia Strategy.
The euro traded at $1.3473, little changed in early
Asian trade after having shed 0.4 percent so far this week.
The common currency fetched 133.05 yen, down 1.0
percent so far in the same period.
The dollar traded at 98.73 yen, flat on the day but
down 0.6 percent so far this week. Initial support is seen
around 98.30 yen.
The yen held firm against the dollar, as U.S. bond yields
fell on softer-than-expected U.S. data and as concerns over a
U.S. government shutdown weighed on risk
"It does look a bit like cliff-hanger," said Bart
Wakabayashi, head of forex at State Street, but added that many
market players still expect a last-minute political compromise.
For now, the political wrangling in Washington may
overshadow the underlying concerns over the Fed's policy
outlook, market players said.
"It's not clear whether the Fed will taper its stimulus in
October or December. And even if it's October, the Fed's policy
meeting will be in late October, which is some time ahead. So
the market may become less sensitive to Fed comments," said
The biggest mover in early trade was the New Zealand dollar,
which fell 0.4 percent to $.08240 following government
data showing the country's trade deficit soared to the highest
level in five years.
The currency has lost 2.4 percent after hitting a 4
1/2-month high of $0.8445 at the start of this week.