The euro hit a nine-year low against the yen on Tuesday as the loss of key technical support led speculators to short the currency in the hope of forcing stop-loss sales against both the yen and the dollar. Falls in Japanese equities helped buoy the yen against the euro and broadly on crosses. There was also some talk of macro hedge-fund selling in the euro against the dollar.
The euro fell to as low as 107.21 yen on trading platform EBS, its lowest since November 2001. After trimming some losses, the euro last stood at 107.29 yen, down 0.5 percent on the day. Against the dollar, the euro hit a six-week low of $1.2620 on EBS. After trimming some of its losses, the euro stood at $1.2638, down 0.2 percent from late US trade on Monday.
Bears were targeting $1.2605, the 50 percent retracement of the euro's rise from a four-year low of $1.1876 in June to its August peak of $1.3334. A break here would open the way to at least $1.2522 and then $1.2479, daily lows from July. In the past few months, market players had overlooked problems in Europe, such as the sovereign debt crisis and the deteriorating health of some banks in the region, due to optimism that a steep fall in the euro earlier this year would help the eurozone economy through a boost in exports, traders said.
The yen was broadly higher and edged back up towards a 15-year peak against the dollar hit earlier in August. The greenback slipped 0.3 percent against the yen to 84.93 yen, falling back towards a 15-year low of 84.72 yen hit on EBS earlier this month.
The trader for a major Japanese brokerage house said there was talk of bids in the dollar at levels near 85.00 yen to 84.80 yen, but added that stop-loss offers were lurking underneath. The low-yielding yen is a funding currency for carry trades and can rise in times of market stress or when equities slide and are seen as denting investor risk appetite.
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