The euro recovered moderately in Tokyo trade Wednesday after falling to a record low against the Swiss franc amid concerns over the European sovereign debt crisis, dealers said. Against the Swiss franc, the single currency hit a fresh low of 1.2530 in early Asian trading, as investors fled to Switzerland's safe haven currency, dealers said.
The euro later firmed on short-covering to 1.2571 against the Swiss franc and rose to 1.3127 dollars in late Tokyo trade from 1.3093 dollars in New York late Tuesday, dealers said. The unit also rose to 109.95 yen from 109.68 yen earlier. Moody's warning Tuesday about a possible ratings downgrade for Portugal over its massive debt fuelled worries about European sovereign debt, dealers said. The rating agency said it could lower by one or two notches Portugal's A1 rating owing to uncertainty about growth and borrowing prospects.
Another of the big three rating agencies Fitch on Tuesday said it could downgrade its rating on Greece, putting it below investment grade, after a review of the troubled eurozone member state's finances. Last week, EU leaders pledged to defend debt-plagued eurozone nations with a permanent bailout mechanism from mid-2013 - the successor to a temporary, IMF-backed trillion-dollar facility.
But there was no decision to increase its size beyond the bloc's temporary 750 billion euro fund, disappointing markets. Greece and Ireland have both been bailed out by the EU and the IMF. Portugal, Spain, Belgium and Italy are considered at risk by experts going into 2011.
"The euro is seen to stay weak as the sovereign debt problem will keep weighing on the currency," said Daisuke Karakama, market economist at Mizuho Corporate Bank. The dollar fell to 83.76 yen from 83.90 yen. The greenback was mixed against other Asian currencies.
It retreated to 1.3112 Singapore dollars from 1.3158 Tuesday and to 44.26 Philippine pesos from 44.33. The dollar edged up to 9,047.50 Indonesian rupiah from 9,042.50, to 29.94 Taiwan dollars from 29.88 and to 30.17 Thai baht from 30.16.