February 25, 2010 / 5:41 PM / 10 years ago

FOREX-Dollar, euro fall vs yen on Greece, US job data

* Greek fiscal woes hurt euro after S&P comments

* Yen hits 3-week high vs dollar, 1-year high vs euro

* U.S. jobless claims rise unexpectedly in latest week (Adds details, comment, updates prices)

By Wanfeng Zhou

NEW YORK, Feb 25 (Reuters) - The dollar and euro fell against the yen on Thursday as worries about the Greek debt crisis and an unexpected rise in U.S. initial jobless claims boosted safe-haven flows into the Japanese currency.

The euro neared a nine-month low against the dollar and hit a one-year low versus the yen as worries of a sovereign debt default in the euro zone grew after ratings agency Standard and Poor’s said late on Wednesday it may cut Greece’s rating one or two notches within a month. [ID:nLDE61N2KL]

Investors’ appetite for risk fell further after U.S. data showing first-time filings for unemployment benefits unexpectedly rose in the latest week, fueling concern about the labor market. See [ID:nN24129689]

“The yen has strengthened through Asian and European trading. Sovereign risk fears and the threats of a downgrade of Greece has definitely had an impact,” said Sacha Tihanyi, currency strategist at Scotia Capital in Toronto.

“The initial jobless claims data has really helped to push more of a U.S.-centric feeling of risk aversion,” he added. “Once we saw that data come out around 8:30 a.m., dollar/yen dropped quite rapidly.”

In midday trading, the dollar dropped to a low of 88.81 yen JPY=, its weakest in about three weeks, according to Reuters data. It was last at 88.83 yen, down 1.5 percent.

At current prices, the dollar’s decline versus the yen is the biggest one-day drop since Feb. 4

Traders said the yen will likely remain in favor going into the Japanese fiscal year-end. Japanese corporates traditionally repatriated overseas revenues back to their domestic currency ahead of the financial year close on March 31.

The euro fell as low as $1.3452, near a nine-month low of $1.3442 hit on Friday, according to Reuters data. It last traded at $1.3482, down 0.4 percent.

Among other ratings agencies, Moody’s Investors Service told Reuters on Thursday any changes in its ratings on Greece would depend on whether Athens delivered on its fiscal reform plans. See [ID:nTOE61O07J]

Fitch Ratings expects to keep Greece’s BBB+ rating unchanged for the next few months barring surprises and is maintaining its negative outlook. See [ID:nLDE61O1EB]

HIGH-YIELDERS TUMBLE

Concerns over Greece and other peripheral euro zone countries’ ability to pay their debts have driven the euro down more than 10 percent versus the dollar from its December highs.

Against the yen, the euro traded as low as 119.66 yen EURJPY=, the lowest since February, 2009, according to Reuters data. It was last at 119.80 yen, down 1.8 percent.

EU inspectors visiting Athens have told authorities they see a deeper than expected recession and higher borrowing costs hindering Greece in meeting its deficit-cutting targets. See [ID:nLDE61O20P]

The spread between Greek and German 10-year government bonds widened, and the cost of insuring Greek debt against default rose. The cost of insuring Spain and Portugal’s debt also rose. [ID:nLDE61O127]

“In short, don’t expect the pressure to let up on the euro before we see further substantive declines from a valuation perspective,” said Mark Frey, director of FX trading at Custom House in Victoria, British Columbia, a global payments dealer.

“The market is just now beginning to square its focus on Spain, Portugal and Ireland, where similar and no less dire situations are beginning to emerge,” he wrote in a note.

Higher-yielding currencies such as the Australian and New Zealand dollars came under heavy pressure. The Australian dollar fell 1.4 percent to US$0.8806 AUD= and was down 2.7 percent at 78.28 yen AUDJPY=R. The New Zealand dollar dropped 1 percent to US$0.6858 NZD=.

Sterling GBP=D4 hit a nine-month low against the dollar on Thursday on weak UK data and concerns the Bank of England could expand quantitative easing. See [ID:nLDE61O1Y5] (Editing by Andrew Hay)

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