Reuters: US Dollar Report: FOREX-Euro hit by recession worries, Aussie tumbles on China data

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FOREX-Euro hit by recession worries, Aussie tumbles on China data Mar 22nd 2012, 16:43 Thu Mar 22, 2012 12:43pm EDT * Unexpectedly weak euro zone PMI data hits euro * U.S. jobless claims data suggests improving recovery * Weak China data pushes Aussie to 2-mth low vs USD * Yen up after Japan reports a trade surplus By Julie Haviv NEW YORK, March 22 (Reuters) - The euro slumped on Thursday after a fall in manufacturing in the euro zone's two largest economies and China revived global growth fears and sent the Australian dollar tumbling. The reports diverged with U.S. data showing unemployment benefits dropped to a fresh four-year low in the latest week. Purchasing managers index surveys showed unexpected falls in euro zone manufacturing and services activity in March, hit by a sharp fall in French and German factory activity. That revived fears the currency bloc's economy is in danger of tipping into recession. Earlier, PMI data showed factory activity in China shrank in March for a fifth straight month, underscoring worries about risks to global growth. "The trajectory of U.S. data continues to point to an improving recovery and in that respect this jobless claims report contrasts with the figures released overnight out of China and the euro zone," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. Against the dollar, the euro last traded at $1.3194, down 0.1 percent, bouncing from an overnight low of $1.3133. Against the yen, the euro was last down 1.1 percent at 108.98 , not far from a one-week low of 108.79 reached after the PMI surveys and a far cry from the euro's near five-month high of 111.43 yen truck on Wednesday. "When you get numbers like this out of the euro zone it definitely puts the growth outlook into question and points to a mild recession," said Niels Christensen, currency strategist at Nordea in Copenhagen, commenting on prospects for the euro zone economy. "There should be a widening of rate differentials in favour of the dollar, so a lower euro/dollar will be the result." However, the euro would need to break below $1.30 to take it out of the $1.30-$1.35 trading range it has been in for the last couple of months. A bigger sell-off in equities may be needed to prompt this, Christensen said. Analysts said the poor PMI surveys highlighted the risk of a recession in the euro zone and peripheral debt showed fresh signs of trouble. The Chinese PMI data weighed on growth-linked currencies, especially the Australian dollar given the country's close trading links with China. The Aussie slid versus the U.S. dollar to hit a two-month low of $1.0333, below the 200-day simple moving average of $1.0399 and the 200-day exponential moving average at $1.0375. Barclays Capital recently lowered their AUD/USD forecast path and now expects the currency pair to trade in a 1.04-1.07 range over the next 12 months. That is consistent with the bank's technical strategists' expectations of it remaining in a 1.01-1.10 range over the next 6-8 months. "We expect high oil prices and signs of weaker Chinese economic activity to keep AUD/USD near current levels over the next month," the bank said. Commodity prices, China growth, yield advantage as well as cyclical and structural demand are underlying reasons why AUD/USD will not fall much below 1.04 this year, they are also the same reasons why significant appreciation above 1.07 is not expected. The New Zealand dollar was last down 0.8 percent against the U.S. dollar at 0.8084, breaching the 100-day exponential moving average, currently 0.8096, for the third time in seven sessions on an intra-day basis. New Zealand dollar/U.S. dollar rose above that measure on a sustained basis on January 9. YEN GAINS The yen was helped after data from Japan showed the country unexpectedly logged a trade surplus of 32.9 billion yen in February, against a forecast 120 billion yen deficit. The dollar was last down 1.1 percent against the Japanese currency at 82.48 yen, pulling away from a recent 11-month high of 84.187. Technicals also show there is little support for dollar/yen at his juncture, with the 14-day simple moving average at 82.61, the 50-day at 79.40, the 100-day at 78.45 and the 200-day at 78.10. The 14-day exponential moving average were at 82.62, the 50-day at 80.29, the 100-day at 79.17 and the 200-day at 79.11. The yen has fallen nearly 8 percent versus the dollar in 2012, on the Bank of Japan's easing steps and after the country last year posted its first annual trade deficit in 31 years due to a surge in fuel imports after the Fukushima nuclear accident. Link this Share this Digg this Email Reprints

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