Currencies: Euro falls to lowest in a week as Deutsche Bank worries weigh

The euro on Friday dropped to its lowest in a week against the U.S. dollar, under pressure as Deutsche Bank’s nagging financial woes loomed large on the last day of September.

The euro EURUSD, -0.4990%  dropped to $1.1167, trading around its lowest since last week, and down from $1.1223 late Thursday in New York, as uncertainty over Deutsche Bank reignited fears of a new eurozone banking crisis.

“Deutsche Bank’s CDS (credit default swaps) rose to a historical high as investors see the counterparty risk mounting. The cash is flowing into the safe heaven assets as chatter about a potential systemic risk hit the wires,” said Ipek Ozkardeskaya, senior market analyst at London Capital Group, in a note.

Deutsche Bank shares were slammed to all-time lows Friday, as the European market SXXP, -0.64% got its first chance to react to reports that some of Deutsche Bank’s biggest clients have been pulling out funds.

Read: Deutsche Bank CEO blames ‘market forces’ for crisis

The euro is on track for a September slip of about 0.1% against the dollar, and was up more than 1% against the British pound EURGBP, -0.5083%  monthly.

The shared currency has “started to behave like the Yen in 2016 where risk averse sentiment actually supports the euro,” wrote Nawaz Ali, U.K. currency strategist at Western Union Business. “Over the past 12 months, each time Chinese economic risks have flared, the euro has tended to appreciate against both the pound and U.S. dollar.”

However, “if new signals suggest this Deutsche Bank crisis can become a systemic issue, meaning the entire European banking sector is at risk, then the euro may start to weaken,” by a more accelerated pace, he added.

Read: Swiss franc rises on jitters over Europe’s banks

Meanwhile, the greenback USDJPY, +0.12%  was just slightly higher against the Japanese yen, buying ¥101.14. The U.S. currency late Thursday in New York bought ¥101.03.

The dollar had been under pressure as U.S. stocks fell on reports about Deutsche Bank. Sentiment remained bruised in Asian trade with the benchmark Nikkei Stock Average NIK, -1.46%  falling 1.5%.

The turn higher for the dollar suggests that “short-term players were covering their short positions,” during Tokyo lunch time, said Daiwa Securities senior FX strategist Yukio Ishizuki.

Investors showed muted reaction to slow inflation in Japan. Japanese consumer prices fell 0.5% from a year earlier for the sixth straight month in August, keeping the Bank of Japan under pressure to do more to generate inflation.

Pound: Sterling GBPUSD, +0.0154%  traded as high as $1.2993 Friday as a reading of gross domestic product showed the U.K. economy grew at a faster-than-expected pace in the second quarter, in a period surrounding the time around the Brexit vote in June.

The U.S. Dollar Index DXY, +0.33% a gauge of the greenback’s strength against a six rivals, rose 0.3% to 94.83.

The WSJ Dollar Index BUXX, +0.16% a measure of the dollar against a basket of major currencies, was up 0.2% at 86.63.

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