Reuters: US Dollar Report: FOREX-Euro down on weak data; Aussie slides

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FOREX-Euro down on weak data; Aussie slides Mar 22nd 2012, 09:35 Thu Mar 22, 2012 5:35am EDT * Unexpectedly weak euro zone PMI data hits euro * Weak China data pushes Aussie to 2-mth low vs U.S. dollar * Yen up after Japan reports a trade surplus By Jessica Mortimer LONDON, March 22 (Reuters) - The euro fell on Thursday and was vulnerable to more losses after weak euro zone data added to worries about a deepening slowdown in the region while below-forecast data out of China dented the higher-yielding Australian dollar. Purchasing managers' surveys revealed unexpected declines in euro zone manufacturing and services activity in March, hit by a sharp fall in French and German factory activity. Those drove the euro to a session low. By 0920 GMT is had lost 0.4 percent against the dollar at $1.3152 and risked further losses towards a recent trough around $1.3004. "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. "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. The euro also fell 1 percent on the day versus the yen to a low of 108.87 yen, its lowest in a week and down sharply from the previous day's near 5-month high of 111.43 yen. "It's always been hard to talk of any real optimism in the euro zone and the mood there remains extremely fragile," said Teppei Ino, currency strategist at Bank of Tokyo-Mitsubishi UFJ in Tokyo. Earlier, HSBC PMI data showed factory activity in China shrank in March for a fifth straight month, underscoring worries about risks to global growth. This weighed on growth-linked currencies, especially the Australian dollar given the country's close trading links with China. It lost 0.8 percent versus the U.S. dollar to hit a two-month low of $1.0368. The Aussie has fallen nearly 4 percent this month amid broader dollar strength. On Thursday, it breached major support at the 200-day moving average of 1.0402, with more chart support located at the base of the Ichimoku cloud - a popular technical indicator - at 1.0354. YEN GAINS The higher-yielding Aussie also lost more than 1 percent against the yen and earlier hit its lowest in nearly three months against the euro at A$1.2740 as investors unwound carry trades, where money is borrowed in lower-yielding currencies to fund riskier investments elsewhere. China is Australia's key export partner with bilateral trade for the previous fiscal term adding up to 7.5 of Australian gross domestic product. The yen was also helped after data from Japan showed the country logged in a trade surplus of 32.9 billion yen in February against a forecast for a 120 billion yen deficit. The dollar was down 0.7 percent against the Japanese currency at 82.77 yen, pulling away from a recent 11-month high of 84.187. "The trade data was a positive surprise as falls in exports were smaller than expected. But it is too early to conclude the trade balance has returned to a surplus trend," said Taro Saito, senior economist at NLI research institute in Tokyo. The yen has fallen 8 percent versus the dollar in 2012, on the Bank of Japan's easing steps and after the country last year logged its first annual trade deficit in 31 years due to a surge in fuel imports after the Fukushima nuclear accident in 2012. Link this Share this Digg this Email Reprints

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