* Dollar at near 4-mth high vs yen, vaults 99 mark JPY=
* Dlr index hits fresh 3-year high, euro/dlr at 3-mth low
* Australian economy contracts for first time in 8 years
* BOJ policymaker concerned on stock market tumble, downturn
(adds quotes, updates prices)
By Veronica Brown
LONDON, March 4 The dollar surged on Wednesday,
closing in on 100 yen, as contracting Australian growth and
concern about Japan's economy heightened global financial
stress, drawing investors to the highly liquid U.S. unit.
Broad dollar gains shook the euro to its lowest in more than
three months, while yen weakness was amplified by the arrest of
a close aide to Japan's opposition leader in a fund-raising
scandal that further clouded the political picture.
Figures released earlier showed Australia's economy
unexpectedly contracted last quarter for the first time in eight
years, sending the Australian dollar tumbling and taking the
euro with it. [ID:nSYD382924]
Bank of Japan board member Miyako Suda said on Wednesday it
was hard to say whether the economy had hit bottom and voiced
concerns on tumbling share prices. [nT357859]
"The markets have a view that Asia is going to perform just
as badly maybe as Europe and the U.S. this year and there's a
view that dollar/Asia en-masse should go higher," said Chris
Turner, head of FX research at ING in London.
On the stimulus front, China will increase spending in areas
such as infrastructure and manufacturing on top of the 4
trillion yuan ($584.7 billion) stimulus package unveiled in
November, a senior economic planning official said.
By 1022 GMT, the dollar was up 1.1 percent on the day at
99.40 yen, having earlier hit 99.48 -- its highest since early
November -- according to Reuters data JPY=.
The euro EUR= fell as far as $1.2457 on trading platform
EBS to its lowest in more than three months. It was last down
0.3 percent at $1.2521 yen. Data showed the euro zone's service
sector was still in decline in February, with services PMI
hitting a record low. [nL462612]
The dollar index .DXY hit a three-year peak at 89.624,
fast approaching 89.90, which would mark a 38.2 percent
technical retracement of its long-term decline from 2001 to
2008. The Australian dollar AUD= tested its lowest levels in
more than a month at $0.6285.
Traders said the euro also drew fire ahead of Thursday's
meeting of the European Central Bank, which is expected to cut
interest rates to a record low of 1.5 percent from 2.0 percent.
ECB Governing Council members Axel Weber and Christian Noyer
said on Tuesday the central bank was considering all options to
extend its monetary toolbox further. [ID:nL3433144]
The yen pared the steepest of its losses after opposition
Democratic Party leader Ichiro Ozawa said he would not resign
over the arrest of a close aide in a fundraising scandal.
But the affair cast a cloud over his party's prospects in an
election that must be held by October.
Analysts are concerned the scandal dims hopes that a
national poll could break a parliamentary deadlock and policy
The yen has already lost favour after Japan's finance
minister resigned last month and as the economy, which many had
once expected would weather the global economic storm quite
well, struggles with a collapse in export markets and mass
"We expect dollar-yen to trade even higher over the next
several weeks, reflecting a powerful shift in market positioning
of what was previously seen as a reliable macro hedge to
deleveraging," Credit Suisse said in a note to clients.
Investors were also looking to U.S. economic data due later
in the day including a monthly private employment survey, which
could set a tone for the government's non-farm payrolls data on
Economists expect the ADP national employment index due at
1315 GMT to show a loss of 610,000 jobs in February.
(Reporting by Veronica Brown; Editing by Toby Chopra)