Euro weakens in Tokyo after France-Germany talks

TOKYO: The euro dropped against major currencies in early Tokyo trade on Wednesday after talks between the leaders of France and Germany on the eurozone debt crisis left investors disappointed.

The single currency was changing hands at $1.4365 in Tokyo morning trade after dipping at one point to $1.4352, compared with $1.4406 in New York overnight.

The euro fetched 110.22 yen against 110.67 yen in New York late Tuesday and 110.41 yen in Tokyo the previous day.

France's Nicolas Sarkozy and Germany's Angela Merkel vowed to shore up economic governance in the eurozone Tuesday to restore confidence in the debt-hit bloc, but offered little to reassure investors, said analysts.

Speaking after the talks in Paris, the leaders said they would propose an EU-wide tax on financial transactions and seek to create a eurozone governing body headed by European Union president Herman van Rompuy.

But the pair disappointed many by not backing the idea of issuing "eurobonds" to pool the debts of the 17 eurozone members, and by insisting the bloc's existing 440-billion-euro ($634 billion) bailout fund was "sufficient".

"The French-German meeting did not provide any clear solutions, and this has incited more euro selling," said Nobuyoshi Kuroiwa, senior deputy general manager at Hachijuni Bank's forex team in Tokyo.

Selling pressure on the single currency also grew overnight after the region's biggest economy, Germany, reported economic growth of just 0.1 percent for the second quarter.

Cautious trading continued for the Swiss franc, which eased overnight after the Swiss central bank hinted the currency could be tied to the euro to stem its rise, dealers said.

The franc moved to 1.1411 per euro from 1.1434 in New York and 0.7943 francs per dollar against 0.7935.

The dollar changed hands at 76.71 yen early Wednesday against 76.75 yen in New York and 76.74 yen in Tokyo Tuesday.

The Japanese currency, seen as a safe-haven unit amid market turmoil, last week neared its post-World War II high of 76.25 to the dollar.

Japan intervened on forex markets in early August, selling yen and buying dollars, and has signalled that it stands ready to do so again.

"Players are looking for fresh factors before they will decide on whether to break the record," Daisuke Karakama, market economist in the forex division of Mizuho Coroprate Bank.

"It is also hard for many players to take clear positions as the market is now looking to (Federal Reserve Chairman Ben) Bernanke's highly anticipated speech on August 26," Karakama added.

Copyright AFP (Agence France-Presse), 2011