FOREX-Euro slumps and yen gains as markets fret over global recovery trajectory

* Court queries German participation in ECB bond purchases
* Euro falls to 3yr low vs yen; yen hits 7wk peak vs dollar
* Other majors drift lower
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Tom Westbrook
SINGAPORE, May 6 (Reuters) - The yen scaled a three-year
high against the euro and a seven-week peak on the dollar on
Wednesday, after a court decision challenging German
participation in Europe's stimulus program and worries about a
bumpy global recovery spooked investors.
Germany's highest court on Tuesday gave the European Central
Bank three months to justify purchases under its bond-buying
programme, or lose the Bundesbank as a participant in a scheme
aimed at cushioning economic blow from the coronavirus.
The news sent the euro EUR= to a one-week low of $1.0826
overnight and it slumped to a three-year trough of 115.09 yen
EURJPY= in Asia, as traders fretted about both the scheme and
the euro's future.
Bears were also on the ascendancy elsewhere, as risk-exposed
majors dipped a tad and the safe-haven yen JPY= cracked
through resistance against the dollar to hit a seven-week high
of 106.20.
Currency and stock markets have been fickle this month, as
dire economic indicators and concerns about U.S.-China tensions
have held optimism about lifting COVID-19 lockdowns in check.
"The yen has been the pick of the major currencies since the
crisis started, and that should continue," Kit Juckes, head of
FX strategy at Societe Generale, said in a note.
"The level of yields is biggest driver of yen strength and
they'd have to go up a fair bit globally to make the yen
weaken." Long-dated U.S. yields rose overnight, as the U.S.
plans a borrowing spree, but remain near historic lows. US/
The yen gained almost half a percent on the Australian
dollar to 68.25 yen AUDJPY= and is close to a three-week high.
The Aussie and kiwi slipped slightly on the greenback, though
held above 64 cents and 60 cents respectively. AUD/
The Aussie AUD=D4 last sat at $0.6422 and the New Zealand
dollar NZD=D4 at $0.6044. The pound GBP= was steady at
$1.2431.
The German court decision is unlikely to completely derail
Europe's stimulus program since the European Central Bank will
probably be able to provide the required justification for its
bond purchases.
But resulting uncertainty is only the latest strain on
Europe's teetering coronavirus response.
The pandemic's heavier toll on indebted Italy and Spain,
compared with Germany, has revived tension between wealthy
northern and poorer southern European member states - leaving
politicians divided and the ECB to do the heavy lifting.
"This will be the second time we have been in a major crisis
where the ECB has been put under heavy pressure," St. Louis
Federal Reserve president James Bullard said on Tuesday.
"This very much is a stress test for the euro and the
European project to be able to react to this crisis in an
effective way," Bullard said in web cast remarks. "I am just
hopeful this will be a catalyst." Elsewhere U.S. President Donald Trump has again pressed
China about the origins of the outbreak that has killed more
than a quarter of a million people since it started in the
Chinese city of Wuhan late last year. Markets are awaiting a response from Beijing to his latest
comments, which last week included a threat of fresh tariffs on
Chinese goods.