Euro softer on weaker stocks

Tokyo - The euro was softer in Asia on Tuesday as weak Japanese shares dented investors' risk appetite, dealers said.

The euro retreated to $1.4528 in Tokyo afternoon trade from $1.4572 in New York late on Monday. The single European currency also sagged to ¥118.69 from ¥119.24.

The dollar fell to ¥81.69 from ¥81.82.

The weaker euro came as the Nikkei average moved lower to end the session down 1.17%.

Also weighing on the euro was a report that European Central Bank President Jean-Claude Trichet does not see any significant second-round inflation in the eurozone.

The report diminished expectations for additional rate hikes in the region, Sumino Kamei, senior analyst at the Bank of Tokyo-Mitsubishi UFJ, told Dow Jones Newswires.

Investors moved to adjust positions ahead of the US Federal Reserve's two-day policy meeting, which was to open later on Tuesday, dealers said.

The Fed is widely expected to maintain interest rates at between zero and 0.25%, where they have stood since December 2008.

The Federal Open Market Committee also was expected to discuss whether the US economic recovery is strong enough to allow the wind down of massive support, with a $600bn bond purchase programme due to end in June.

Markets are keenly awaiting Fed chairman Ben Bernanke's first news conference on Wednesday after the meeting. It will be the first by any Fed chief, in contrast with regular news conferences held by Trichet.

Kuniyuki Hirai, a foreign exchange division manager at Bank of Tokyo-Mitsubishi UFJ, said: "Mr Bernanke will not make any negative comments on the US economy, while maintaining a prudent stance on its monetary policy."

The dollar showed strength against other Asian currencies, rising to Sg$1.2372 from Sg$1.2362, to 1 086.25 South Korean won from 1 081.35 and to Tw$28.94 from Tw$28.91.

The US currency also gained to 8 655.00 Indonesian rupiah from 8 622.50, to 43.28 Philippine pesos from 43.16 and to 30.00 Thai baht from 29.92.