TOKYO, Dec 15, 2008 (AFP) - The euro shot up to an eight-week high against the dollar in Asia on Monday as a rebound in stock prices boosted demand for higher-return currencies, dealers said.
The euro rose to 1.3490 dollars in Tokyo afternoon trade, up from 1.3380 in New York late Friday. The European currency rose to 122.60 yen from 121.82.
"Sentiment toward the euro appears to have made a turnaround for the better," said Minoru Shioiri, senior forex manager at Mitsubishi UFJ Securities, told Dow Jones Newswires.
The dollar edged back down towards the key 90 yen level, which it slipped below briefly last week for the first time in 13 years.
The greenback dropped to 90.90 yen in Tokyo, down from 91.06 yen in New York on Friday, when the greenback hit 88.40 yen at one point after the US Senate rejected a package aimed at rescuing US automakers.
Satoru Ogasawara, foreign exchange strategist at Credit Suisse, said the yen could extend its rise amid the continuing financial turmoil.
"The Bank of Japan has little room for a further interest rate cut but the recent string of rate cuts in other countries has brought their rates closer to those of Japan," Ogasawara said.
"Given low returns overseas, Japan may be picked for the place of investment," he said.
Japan's benchmark lending rate stands at just 0.3 percent, the legacy of years of efforts to tame deflation and revive a low-growth economy.
But its rates may not be the lowest in the world for long. There is speculation that the US Federal Reserve could this week slash rates by as much as 0.75 percentage points to 0.25 percent.
The yen largely shrugged off news that confidence among big Japanese manufacturers plunged at the fastest pace in more than three decades in the past quarter.
A weak survey had been expected and the yen could rally again if uncertainty continues over a bailout plan for beleaguered US automakers, said Resona Bank analyst Masato Otsubo.
The dollar fell to 33.20 Taiwan dollars, down from 33.29 on Friday, to 1.4764 Singapore dollars from 1.4941 and to 1,352 South Korean won from 1,374.
The greenback also declined to 47.78 Philippine pesos from 47.95 and to 34.91 Thai baht from 35.03, but rose to 11,150 Indonesian rupiah from 11,120.