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Latest update : 2010-05-17

The euro tumbled to its lowest level since April 2006 on the Tokyo market Monday, as a trillion dollar EU-IMF rescue package failed to allay continued concerns over eurozone debt.

AFP - The euro plunged to its lowest level since April 2006 in volatile Tokyo trade Monday, as persistent fears over eurozone debt continued to hammer the single currency and regional stock markets.

Sentiment remained fragile despite an EU-IMF rescue package worth almost one trillion dollars designed to prevent the Greek crisis from spreading, with fears growing that the single currency is at risk of collapse.

The euro fell to as low as 1.2243 dollars in Tokyo trade from 1.2358 in New York Friday.

Tokyo shares were 1.98 percent lower, Hong Kong dived 2.46 percent and Sydney was down 2.69 percent while Seoul was off 1.66 percent. Singapore was 2.78 percent lower and Shanghai fell 2.55 percent.

The rescue package was greeted with initial optimism but has since failed to reassure sliding markets, with Europe's growth prospects further stymied by belt-tightening measures announced by Spain, Portugal, Italy, and France.

"Concerns that severe fiscal austerity in the eurozone will crush growth in the region continues to weigh" on the euro, said John Kyriakopoulos of National Australia Bank in Sydney.

"Investors are questioning if tightening fiscal spending really is the right thing to do because it would have a negative impact on the economy," said Hideaki Inoue, chief forex manager at Mitsubishi UFJ Trust and Banking Corp.

"The entire economic outlook is becoming increasingly grim."

There was some support from figures showing Japanese machinery orders, considered a leading indicator of corporate Japan's appetite for spending, rose a better-than-expected 5.4 percent in March from the month before.

Regional markets followed European and Wall Street stocks lower. On Friday the Dow dropped 1.51 percent on escalating fears for the health of the eurozone.

"While a financial safety net is in place (in the eurozone), that doesn't remove the considerable economic concerns that burden that region," Jamie Spiteri, head of trading at Shaw Stockbroking in Sydney told Dow Jones Newswires.

Japanese exporters extended losses, with their overseas profits threatened by the euro's weakness. Sony was off 2.9 percent, Honda Motor down 0.66 percent and Toshiba 1.18 percent lower.

"The market has no confidence in the euro," Mizuho Corporate Bank market economist Daisuke Karakama said, noting the single currency was lower even though there was no fresh news to drive it down.

Gold has soared to record peaks as investors exit the single currency in favour of safe haven investments, with the precious metal opening at 1,237.00 US dollars in Hong Kong, down from Friday's record high of 1,249.40 dollars.  

The debt crisis began as Greece teetered towards default, triggering fears that other weak economies such as Portugal, Spain and Italy may be next.

Worries that a possible debt default by Greece could hit the world's financial system in the same way the collapse of Lehman Brothers did two years ago have sent shares and the euro plunging.

IMF chief Dominique Strauss-Kahn said Sunday that European nations took too long to respond to the Greek crisis.

Athens is now paying a painful price for its past overspending with the government forced to slash civil servant pay and pensions while raising taxes as a condition for a 110-billion-euro EU-IMF bailout.

The IMF and EU agreed the Greek bailout package only at the beginning of May, and a week later were forced to put together the trillion-dollar euro rescue plan as investors continued to dump the currency and European shares.

Greek Prime Minister George Papandreou Sunday raised the possibility of taking legal action against US banks, saying they bear "great responsibility" for Greece's debt crisis, according to a transcript of an interview provided by CNN.

Oil was lower. New York's main contract, light sweet crude for delivery in June, was trading at 70.43 dollars a barrel, down 1.18 dollars from its close in US trade on Friday. Brent North Sea crude for July delivery slid 1.43 dollars to 76.50 dollars.

Date created : 2010-05-17

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