LONDON, Aug 19: The yen lurched lower against the dollar on Monday after US ratings agency Standard and Poor’s warned that Japan’s debt ratings may be cut if economic reform was delayed, dealers said.

The dollar rose to 118.49 yen from 117.67 late on Friday.

The single European currency stood at $0.9818 against 0.9848 on Friday.

The yen was undermined by a report today from Standard and Poor’s expressing concern that (Japanese) Prime Minister (Junichiro) Koizumi is backtracking on his commitment to structural reform, noted Bank of Tokyo-Mitsubishi head of global currency research Paul Chertkow.

Standard and Poor’s said in a report: A string of policy decisions recently announced by the Japanese government appear to backtrack on reforms previously advocated by Prime Minister Junichiro Koizumi.

Further delays in implementing structural reforms could adversely affect the (sovereign) ratings.

The yen was also hurt by fresh losses run up by Japanese share prices. The benchmark Nikkei-225 index of the Tokyo Stock Exchange lost 1.9 per cent on Monday to close around 180 points shy of its post-bubble low of 9,420.85.

The euro sagged against the dollar as attention began to switch back to the euro-zone economies this week.

The highlight of the euro-zone economic calendar is preliminary second-quarter gross domestic product figures on Thursday. Consensus forecasts by economists in London are for quarterly growth of 0.3 per cent and an annual pace of 0.1 per cent.

The German central bank, the Bundesbank, gave a prelimiary second-quarter growth forecast for the Germany economy of 0.25 percent from the previous quarter in its monthly report published on Monday.

The Bundesbank also warned that the country’s budget deficit for 2002 could reach the ceiling of three percent of gross domestic product set down in the European Union’s Stability and Growth Pact.

A strict limit on deficits at all state levels is absolutely necessary for the remainder of the year to avoid reaching the three per cent level, the Bundesbank said.

The 1997 Stability and Growth Pact requires the 12 countries using the euro to hold public deficits to less than three per cent of gross domestic product.

Separate data from the EU statistics office Eurostat showed that the euro-zone harmonised index of consumer prices fell 0.2 per cent in July from June and was up 1.9 per cent on a 12-month basis.

The euro was changing hands at $0.9818 against 0.9848 on Friday, 116.39 yen (115.91), 0.6388 pounds (0.6401) and 1.4665 Swiss francs (1.4663).

The dollar was being quoted at 118.49 yen (117.67) and 1.4929 Swiss francs (1.4886).

The pound was at 1.5384 dollars (1.5378), 182.23 yen (180.99) and 2.2967 Swiss francs (2.2900).

On the London Bullion Market, an ounce of gold dipped to 313.75 dollars from 314.20 late on Friday.—AFP