Reuters: US Dollar Report: FOREX-Euro slips on dollar ahead of German Ifo data

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FOREX-Euro slips on dollar ahead of German Ifo data Mar 26th 2012, 07:40 Mon Mar 26, 2012 3:53am EDT * Euro faces tough resistance around $1.3300 * German Ifo survey to give indication on growth prospects * Yen lower against the dollar, euro By Anirban Nag LONDON, March 26 (Reuters) - The dollar was higher against the euro and the Japanese yen on Monday, supported by a rise in U.S. bond yields, with any further signs of weaker euro zone economic activity likely to help it sustain gains against the common currency. A key German business survey is due for release at 0800 GMT and while analysts forecast the Ifo think tank's business climate index will stay steady, many traders are bracing for a soft number after last week's weak reading of flash purchasing managers' indices (PMIs) across the euro zone. That could stoke concerns about a recession and may trigger a sell-off in the euro. The euro was down 0.2 percent at $1.3245, moving away from a three-week high of $1.3294. Traders said that with the euro failing to breach resistance at $1.3302 last week, a level representing a 61.8 percent retracement of its late February to mid-March fall, the bias was for losses. Indeed, more falls could see it target the 100-hour moving average at $1.3227. Investors shied away from chasing last week's bounce as the euro faced a slew of risk events this week, also including bond auctions in Italy and a meeting of euro zone finance ministers. Italy is seeking raise up to 7.5 billion euros amid renewed pressure on peripheral euro zone debt. "If the PMIs are any guide, the Ifo business expectations are likely to soften and along with the headline numbers could drive the euro lower," said Jeremy Stretch, head of currency strategy at CIBC World Markets. "Having failed to rise above $1.33, we see the risk of the euro falling with a softer Ifo reading likely to exacerbate the situation as traders will lighten positions." While the euro lost ground against the dollar, it was higher against a broadly weaker yen, rising 0.3 percent to 109.60, but well below a five-month high of 111.43 yen. DOLLAR FIRMER The dollar also advanced against the Japanese currency, c limbing 0.5 percent to 82.73 yen and inching closer to an 11-month high of 84.19 struck on March 15. Strong support is seen at the 38.2 percent retracement of its February-March rise at 81.06 yen. Traders said they would prefer to buy the dollar and sell the yen, with repatriation inflows ahead of the Japanese fiscal year-end on March 31 unlikely to change the bearish sentiment towards the Japanese currency over the medium term. "Even though the dollar rally on the yen has lost a bit of momentum, the dollar is still strong after it didn't break below 81.97 support twice in the last two weeks," said Teppei Ino, currency strategist at Bank of Tokyo-Mitsubishi UFJ in Tokyo. "I wouldn't expect Japanese repatriation flows to keep a lid on the dollar ahead of the fiscal year-end. We hear a lot about importers buying the dollar on the dip than offers by exporters," he said. Ino added that many exporters have already finished their currency hedging, not only for the fiscal year to March 31 but also up to the end of the first quarter of the next financial term. The dollar index, a gauge of its performance against a basket of major currencies, rose 0.1 percent to 79.425, having recovered from a two-week low last week. The yield on U.S. 10-year notes rose about two basis points to 2.25 percent on Monday, little changed ahead of a speech by Federal Reserve Chairman Ben Bernanke scheduled for 1200 GMT, with some looking for any signs of dovishness. The dollar/yen currency pair has a strong correlation with the spread between U.S. and Japanese bond yields. A wider spread tends to boost the greenback while a narrowing one pushes the dollar lower. The growth-linked Australian dollar was 0.1 percent lower at $1.0443, steadying somewhat after a steep fall last week. Link this Share this Digg this Email Reprints

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