Euro Falls Again As Fear Rules

Increasingly difficult borrowing conditions in the euro zone, tighter U.S. banking regulation and increase tensions on the Korean peninsula has kept investors cut risk in their portfolio.

Wall Street met late Tuesday to end flat, briefly pushing up U.S. stock market futures. Deflated but persistent selling of the euro and Australian dollar against the yen in early Asian trading on hopes a permanent shift in mood and cut gains in equities.

"Doubt and care dominate the market. There is no doubt southern European countries are the only ones with debt problems," said Suh Dong-pil, a market analyst at Hana Daetoo Securities in Seoul.

"Increased tensions with North Korea is also negative."

The euro fell 0.7 percent on the day at $ 1.2285, and climbed down on a four-year low around $ 1.2140 hit 14 in May The euro is ready for its biggest monthly decline since January 2009.

Against the yen, the euro was down 1.1 percent to 110.60 yen, with the aid of 108.85 yen a 8-1/2-year low hit on Tuesday.

The Australian dollar has fallen 0.9 percent to $ 8210 on track for the biggest monthly decline since October 2008.

Stress

Stress in funding markets has brought back painful recollections about fallout from Lehman Brothers fiasco in 2008.

The combination of a rush of euros in U.S. dollar and fears that last weekend's takeover by a Spanish savings bank of the central bank may be a sign of bigger problems have pushed up short-term U.S. dollar funding costs.

Three-month U.S. dollar Libor settled Tuesday at 0.5362, its highest since July 2009, has more than doubled in the last three months.

A Reuters poll of money market traders showed was expected to rise to 0.70 per cent over the next month.

Japan's Nikkei share average rose 0.4 percent after plumbing services for a six-month low Tuesday, but was ultimately dependent on the direction of the euro.

"We tend to see short covering and negotiate-hunting today, as how far the Nikkei fell yesterday," said Toshiyuki Kanayama, market analyst at Monex Inc. in Tokyo.

But there is still much more long-term uncertainty and if the euro becomes unstable as it was yesterday, things can change. "

MSCI index of Asia-Pacific shares outside Japan was up 0.7 percent, helped by a jump in resource-related shares. Since its peak in the last bull market rally in April 1915, Asian shares have fallen 18 percent, almost 20 percent mark generally define a bear market.

The index was trading at 11.8 times earnings expected over the next 12 months, the lowest since March 2009, Thomson said I / B / E / S data showed.

Valuation has also fallen in Japanese that they were at the beginning of the 2009 rally, with investors U.S. and European equities focus on overall financial and economic risks that may be attractive prices will not be enough to support the market in the short term.

Ten-year U.S. Treasury note futures were mostly flat, cutting earlier losses as stocks tracked gains. The cash market rose with the benchmark 10-year yield at 3.1560 percent compared with Tuesday's intraday low of 3.0642 percent.

U.S. crude for July delivery gathered 0.8 percent to $ 69.29 per barrel after a report from a larger than expected drop in gasoline inventories.