The yen fell to the lowest since January against the dollar after
Japan's government said the economy is ``deteriorating,'' acknowledging
for the first time that the country's longest postwar expansion has
probably ended.
``The Japanese economy is slipping into a recession,'' said Hidetoshi
Yanagihara, senior currency trader at Mizuho Corporate Bank in New
York. ``The concern is that Japanese interest rates are too low. This
is one major reason people are selling the yen.''
Euro remains under pressure as investors speculate ECB will keep its
key interest rate at a seven-year high of 4.25 percent tomorrow,
according to the forecasts of economists. ECB President Jean- Claude
Trichet will hold a press conference after the rate decision tomorrow
in Frankfurt.
Trichet said on July 3 that he had ``no bias'' or ``pre- commitment''
after policy makers increased the main refinancing rate a
quarter-percentage point.
``The ECB will send the message that they will keep the neutral
stance,'' said Matthew Strauss, a senior currency strategist at RBC
Capital Markets Inc. in Toronto, a unit of Canada's biggest bank by
assets. ``The risk is that they will acknowledge that growth is coming
down faster than expected.''
Factory orders in Germany, adjusted for seasonal swings and inflation,
declined 2.9 percent from May, the Economy Ministry in Berlin said
today. That's the biggest drop since July 2007.
``I would call it a bluff if the ECB remains hawkish,'' said Richard
Franulovich, a senior currency strategist at Westpac Banking Corp. in
New York. ``Their growth numbers are pointing south. The ECB has to
step away from their rhetoric eventually. The dollar is an attractive
currency right now.''