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Euro falls in Asia ahead of economic worries

The euro slipped to 1.2976 dollars in Tokyo morning trade from 1.2982 in New York late Monday. The dollar rose to 98.44 yen from 98.24. The euro gained to 127.72 yen from 127.47.

There were fears that the ZEW research institute’s index of investor confidence would show the first decline in five months following drops in exports and industrial output, dealers said.

A gloomy report would probably weigh on the euro, which is sensitive to negative news, particularly against the safe-haven dollar, dealers said.

“We think that the economic data will continue to serve as a reminder of how bad things are and cap rallies in risky assets,” Barclays Capital analysts wrote in a note.

There is speculation that the European Central Bank will cut interest rates again to revive growth, after slashing its base rate earlier this month to 1.50 percent, the lowest level in the bank’s 10-year history.

A drop in the ZEW index could pressure the euro by “heightening expectations for additional ECB rate cuts, since Germany and the other European countries are not debating additional economic stimulus measures,” said Royal Bank of Scotland forex strategist Masafumi Yamamoto.

Traders will also be closely watching a two-day Federal Reserve meeting beginning Tuesday where Fed Chairman Ben Bernanke may offer more clues on the outlook of the US economy and fresh tools to spur banks’ lending.

Japan’s central bank was also due to begin a two-day meeting at which interest rates are expected to be left on hold at 0.1 percent.