Earlier the yen fell against the euro on speculation a drop in interbank borrowing costs will encourage investors to step up purchases of higher-yielding assets financed by low-cost loans in Japan's currency.
The dollar gained against the euro as evidence that Europe’s economic outlook is “precarious”.
Growth expected to grind to a halt next year and put government finances under significant pressure, the European Commission warned on Monday.
Growth in the European Union is expected to slow sharply from 1.4 per cent this year to just 0.2 per cent in 2009, according to the Brussels executive’s latest economic forecast. The eurozone – covering the 15 countries that share the euro – would slow from 1.2 per cent to just 0.1 per cent.
Eurozone inflation would average 2.2 per cent next year and 2.1 per cent in 2010 – almost within the European Central Bank’s target of an annual rate “below but close” to 2 per cent. Falling commodity prices, the weaker growth outlook and the outlook for unemployment had reduced the dangers of inflationary pressures becoming entrenched, it said.
The gloomy outlook prompted Joaquin Almunia, economic and monetary affairs commission, to call for “co-ordinated action at the EU level to support the economy” in the same way governments had acted to shore up the banking system.
EUR/USD having shown session high in the field of $1,2890, the pair has finished session in area of a session low $1,2640.