FOREX-Euro down on Greece downgrade, risk appetite fades

Some forex news and update about the latest forex market.
The euro fell against the dollar and yen on Wednesday after a downgrade to Greece's debt rating heightened fears about the euro-zone economy and a sharp slide in U.S. retail sales suggested a deepening global slump.

Though a 2.7 percent plunge in sales at U.S. stores in the December holiday shopping season shed light on the severity of the U.S. recession, the dollar gained on fear that a tapped-out American consumer is also trouble for the rest of the world.

That sent the euro to a fresh one-month trough beneath $1.31 . It later rebounded to $1.3155, down 0.3 percent.

"The retail sales number seems like a bearish number for the U.S., but it's actually probably more reflective of a bearish signal for those who export a lot to the United States," said David Watt, senior currency strategist at RBC Capital Markets in Toronto.

Standard & Poor's move to cut Greece's sovereign debt rating also weighed on the euro, sending it at one point to a near six-week low at 116.58 yen and boosting the chances that the European Central Bank will cut interest rates on Thursday from 2.5 percent to 2 percent.

The Russian ruble fell to a six-year low against the dollar and record low against the euro as authorities quickened the pace of devaluation amid falling oil prices and soaring capital outflows. [ID:nLE384040].

A rise in investor risk aversion also sent the New Zealand and Canadian dollars tumbling against the U.S. currency, as both are seen as vulnerable to falling commodity prices and slowing growth.

The safe-haven appeal of the yen, meanwhile, got a boost, with the dollar at one point falling to 88.62 yen as U.S. stocks fell and fears of new banking credit losses grew. It last traded at 89.02 yen, down 0.1 percent from Tuesday.

EURO WOES

Adding to bearish sentiment on the euro were reports, later denied, that Irish Prime Minister Brian Cowen said IMF help may be needed if Ireland's economic downturn worsens.

The IMF also weighed in, saying there was no reason to think that Ireland will need IMF financing. [ID:nLE197032].

Concerns over the single currency bloc's economy and public finances mounted after Spain and Portugal became the third and fourth euro zone countries, after Greece and Ireland, since last week to be warned by S&P that their credit rating is under threat from the global financial crisis