Tuesday May 26, 11:35 AM
Euro slips under $1.39
LONDON (AFP) - The European single currency sank under 1.39 dollars on Tuesday after confirmation that eurozone powerhouse Germany was mired in its deepest recession since World War II, dealers said.
In London trade, the euro pulled back to 1.3888 dollars, compared with 1.4017 dollars late on Monday. It had burst back above 1.40 on Friday for the first time since January 2.
Against the Japanese currency, the dollar fell to 94.79 yen from 95.01 yen late Monday.
Trade continued to be thin after markets in the United States and Britain were closed on Monday for public holidays.
Germany's gross domestic product (GDP) shrank by 3.8 percent in the first three months of the year compared to the last three months of 2008 the Destatis statistics office said, confirming preliminary data.
The contraction -- the fourth in a row -- was due mainly to a plunge in exports of nearly 10 percent and was the worst decline in modern German history.
In addition, official EU data released Tuesday showed that factories in the 16 nations using the euro single currency saw demand fall in March.
New industrial orders slid 0.8 percent in March compared to February, bringing the drop over 12 months to 26.9 percent, the European Union's Eurostat data agency said.
Dealers said that investors were meanwhile focusing on the worsening US public finances a day after North Korea grabbed attention with a nuclear test.
"Geopolitical risk in Asia following North Korea's test was a good impetus to sell the yen, but regional worries eased as investors believe the United States has the upper hand," said Hachijuni Bank strategist Masatsugu Miyata.
"Instead, fears about America's ballooning budget deficit have returned to the forefront of investors' minds," he added.
North Korea's announcement Monday that it had tested a nuclear bomb many times more powerful than its first one in 2006 angered governments worldwide and prompted an emergency session of the UN Security Council.
The North also test-fired three short-range missiles Monday, South Korea's military said. The news has lifted the safe-haven dollar and weighed on the yen due to Japan's geographical proximity to North Korea.
Dealers said markets were also growing worried about whether Washington's planned sale this week of new bonds would be successful, amid worries over the outlook for the US sovereign debt rating.
The euro had jumped Friday above 1.40 dollars for the first time since the start of the year amid growing fears about a possible downgrade of US credit ratings.
Although there was no specific news about the US credit rating, a warning by Standard & Poor's on Thursday of a possible downgrade of Britain's rating prompted fears the United States might be next, dealers said.
In London trade on Tuesday, the euro was changing hands at 1.3888 dollars against 1.4017 dollars late on Monday, at 132.67 yen (132.92), 0.8784 pounds (0.8809) and 1.5197 Swiss francs (1.5175).
The dollar stood at 94.79 yen (94.83) and 1.0838 Swiss francs (1.0824).
The pound was at 1.5935 dollars (1.5908).
On the London Bullion Market, the price of gold fell to 945.35 dollars an ounce from 959.75 dollars an ounce late on Friday.
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