Euro falls after Moody's downgrades Italy

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TOKYO: The euro came under pressure in Asia Wednesday after Moody's downgraded Italy's debt rating, fuelling worries over eurozone debt and the impact of a possible Greek default on the global economy.

The euro fell to $1.3284 in Tokyo trade from $1.3338 in New York late Tuesday. The single currency also sagged to 101.82 yen from 102.14 yen.

The dollar inched down to 76.65 yen from 76.82 yen.

"The market is jittery about political wrangling hampering aid to Greece after the eurozone finance ministers' meeting has shown no immediate action and need for more time," said Teppei Ino, analyst at the Bank of Tokyo-Mitsubishi UFJ.

Two-day talks between European finance ministers wrapped up with no fresh news Tuesday, while Athens was denied the next eight-billion-euro ($10.7 billion) tranche of bailout money it needs to avoid defaulting on its debts.

Ratings agency Moody's on Tuesday downgraded Italy's government bond rating by three notches from Aa2 to A2 with a negative outlook, citing risks for the financing of long-term debt and slow economic growth.

The move poured cold water on sentiment after the euro gained and US stocks saw a last-minute rally overnight.

A Financial Times report that EU officials were studying ways to safeguard banks exposed to debts of financially weak eurozone governments had temporarily eased the market's worries, dealers said.

But its effect proved short-lived. The Nikkei stock index in Tokyo lost ground shortly after opening in positive territory.

"These articles are not saying they have done anything, all they are saying is that they are willing to talk about it," HiFX Senior Trader Stuart Ive told Dow Jones Newswires.

EU officials demanded Greece make more sacrifices and warned banks may have to shoulder more losses as part of the resolution of the debt crisis.

Barclays Capital chief Japan strategist Masafumi Yamamoto said that chances are increasing that additional support to debt-ridden Greece will be delayed, which should weigh on the euro.

"Gains in the euro we saw on Tuesday in New York are not long-lasting, and we will likely see the euro falling below 101 yen again," Yamamoto said. (AFP)