Reuters: US Dollar Report: FOREX-Euro slips on European manufacturing, yen climbs

Reuters: US Dollar Report Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com

FOREX-Euro slips on European manufacturing, yen climbs Apr 2nd 2012, 20:40 Mon Apr 2, 2012 4:40pm EDT * Euro zone manufacturing contracts again in March * Euro pressured again on outlook * Yen gains on start of quarter short covering, but weakness seen By Julie Haviv NEW YORK, April 2 (Reuters) - The euro started the second quarter of 2012 lower against the dollar and yen on Monday as weak European manufacturing data reflected a growing divide between the economic outlooks of the United States and the euro zone. Manufacturing strengthened in the United States and China in March. It contracted in the euro zone for the eighth straight month. Reports from the euro zone, which is teetering on the brink of recession, showed the downturn in the region's peripheral economies has spread to core countries Germany and France, according to purchasing managers' indexes (PMIs) for March. The outlook was grim as new orders fell across the region for the 10th month. The weak data should keep European Central Bank monetary policy accommodative. At the same time, the U.S. Federal Reserve is expected to keep rates at near zero until 2014. "We are looking at interest rates that are low in both the U.S. and Europe and that is why the euro has been stuck in a range, trading within the $1.33-$1.3350 area," said Daniel Wang, senior currency strategist at Forex.com in New York. "Until we see more solidified views from either the Fed or the ECB, the euro/dollar should remain range bound." The euro last traded at $1.3324, down 0.1 percent on the day, and below a recent one-month high of $1.3385, according to Reuters data. The euro has traded between $1.33-$1.3380 since March 26. Resistance of euro/dollar is at $1.3380, but a break could ignite a quick move to $1.35, Wang said. The Federal Reserve on Tuesday will release minutes from its last policy meeting. Two Fed policymakers on Monday signaled little appetite for further monetary steps to stimulate U.S. growth while persistently high inflation will prevent the ECB from doing anything new on Wednesday."PMIs out of Europe are another reminder of the extent economies have gone down," said Omer Esiner, chief market analyst with Commonwealth Foreign Exchange in Washington, D.C. "Strong U.S. data this week is likely to see the dollar strengthen on rising yield appeal." YEN LEAPS ON SHORT COVERING The dollar last traded down 0.9 percent at 82.02 yen and the euro down 1.1 percent at 109.28 yen. Forex.com's Wang said yen strength was largely due to hedge funds and real money accounts covering short positions on the first day of the quarter. The dollar and euro are up 6.6 percent and 9.8 percent against the yen year-to-date, respectively. Nomura Securities said there are a number of forces which point to yen weakness over time, including weakening trade flows, accelerating outflows from Japan and a potentially a more proactive Bank of Japan. A significant part of the yen weakness in the past two months has been driven by better data in the U.S. and related re-pricing of U.S. forward rates, and well as a calming of euro zone financial markets. "We think the impulse from these global forces are now running out of steam as we enter Q2. On this basis, some yen retracement (stronger) is likely in the next 1-2 months, even if the longer-term trend is for gradual yen depreciation," Nomura wrote in a report. "We think a scenario where USDJPY trades back to 80 and EURUSD trades down to 1.30 is likely, suggesting that EURJPY can trade to 104. All told, we are short EURJPY from 109.50, with a stop at 111 (just above recent highs)." The Australian dollar was up around 0.8 percent for the day at $1.0420, though off a high of $1.0449 touched earlier in the global session. The currency tends to benefit from any signs of improvement in the Chinese economy due to Australia's strong trade links with the country. But many analysts have recently expressed concerns it is overvalued. Link this Share this Digg this Email Reprints

You are receiving this email because you subscribed to this feed at blogtrottr.com. If you no longer wish to receive these emails, you can unsubscribe from this feed, or manage all your subscriptions