The euro extended losses against the dollar yesterday on fresh doubts over the strength of the eurozone economic recovery while the yen continued firmer, dealers said.
They said discussions between the government and Bank of Japan officials had been expected to produce at least a sign Tokyo was considering intervention to halt the yen’s recent rise which it is feared will crimp exports.
In the event, the talks produced no concrete lead, allowing players to push the yen further ahead against the dollar.
In late London trade, the European single currency fell to $1.2677 from $1.2714 in New York late on Friday.
Against the Japanese currency, the dollar dropped to 85.17 yen from 85.63 yen on Friday.
The euro fell as a leading indicator showed the economic recovery in the 16-nation eurozone lost momentum in August, with growth still depending on powerhouses Germany and France.
The purchasing managers’ index (PMI), a survey of €4,500 area companies compiled by data and research group Markit, fell to 56.1 points from 56.7 points in July, when it had accelerated for the first time in three months.
“The reading was still consistent with a robust rate of expansion and combined manufacturing and service sector output has now risen for 13 consecutive months,” Markit said.
Elsewhere, Prime Minister Naoto Kan and Bank of Japan governor Masaaki Shirakawa spoke by phone yesterday to discuss the economic impact of a strong yen, officials said, but did not discuss possible intervention.
Markets had anticipated stronger government pressure on the central bank to do more to lift the economy, such as further monetary easing, but no proposals were announced following the conversation. Instead the yen rose, with the conversation taken as a signal that Tokyo will refrain from monetary easing for now.
“Disappointment spread as the market took the news as a cue to sell shares and buy the yen,” said Hirokazu Fujiki, strategist at Okasan Securities.
The safe-haven yen has strengthened beyond levels assumed earlier by many exporters, who stand to lose from its rise.
In late London trade, the euro changed hands at $1.2677 against $1.2714 on Friday, at 107.98 yen (108.85), 0.8162 pounds (0.8182) and 1.3167 Swiss francs (1.3140).
The dollar stood at 85.17 yen (85.63) and 1.0387 Swiss francs (1.0336).
The pound was at $1.5532 (1.5535).
On the London Bullion Market, the price of gold rose to $1,226 an ounce from $1,223.50 an ounce on Friday.