Reuters: US Dollar Report: FOREX-Euro falls broadly after German data, Moody's warning

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FOREX-Euro falls broadly after German data, Moody's warning Jul 24th 2012, 20:45 Tue Jul 24, 2012 4:45pm EDT * German data dims euro outlook * Moody's changes German rating outlook to negative * Greece could miss debt reduction - EU officials By Wanfeng Zhou NEW YORK, July 24 (Reuters) - The euro tumbled to a two-year low against the dollar for a third consecutive session on Tuesday, pressured by weaker-than-expected German data, a day after Moody's warned of fallout from Europe's debt crisis on the region's strongest economies. Analysts said the euro looked poised to take out the key $1.20 area, but further losses could be limited as markets shift attention to a Federal Reserve meeting next week when policymakers will likely discuss the possibility of further stimulus for the U.S. economy. Manufacturing in Germany, the euro zone's biggest economy, contracted at its fastest pace in more than three years and its service sector also shrank. In France, factory activity fell at its fastest pace since May 2009. The data came a day after Moody's revised its outlook for Germany, the Netherlands and Luxembourg to negative, warning that Europe's top-rated countries may have to increase support for indebted states such as Spain and Italy. "There's overall caution and concern that the stronger countries may not have either the willingness or the ability to help out the periphery," said Vassili Serebriakov, senior currency strategist at Wells Fargo in New York. The euro fell as low as $1.2040, its weakest level since June 2010, extending losses after some EU officials said Greece is unlikely to be able to pay what it owes and further debt restructuring is likely to be necessary. It was last at $1.2062, down 0.4 percent. Inspectors from the European Commission, the European Central Bank and the International Monetary Fund returned to Athens on Tuesday and will complete their debt-sustainability analysis next month. Against the yen, the euro lost 0.7 percent to 94.31 yen , having hit 94.09 yen, an 11-1/2-year low. The dollar lost 0.3 percent to 78.16 yen. The euro also fell against higher-yielding currencies. It traded at A$1.1789 against the Australian dollar, near Monday's record low of A$1.1679, and at C$1.2319 versus the Canadian dollar, also near a record low. Since the European Central Bank cut interest rates earlier this month, the euro has fallen heavily against a range of currencies as investors increasingly use it as a funding currency to purchase higher-yielding assets. Losses in the currency also accelerated after Spanish bond yields jumped well above the 7 percent danger level this week, raising fears Madrid will need a full-scale sovereign bailout. Spanish bond yields rose further on Tuesday after the country paid its second-highest yield to issue short-term debt since the introduction of the euro in 1999. FED ACTION Attention could start to shift to Friday's first reading of U.S. second-quarter growth, analysts said. A weak number could boost expectations of another round of bond-buying, or QE3, from the U.S. central bank and weigh on the dollar. Data earlier showed U.S. manufacturing this month expanded at its slowest pace since late 2010, hobbled by weak overseas demand for American goods, though a rise in domestic orders helped cushion the blow. The dollar slightly pared gains versus the euro in late trade after the Wall Street Journal said Federal Reserve officials were moving closer to taking new steps to spur activity and hiring. Top Fed officials recently have spelled out what measures they might take, including Chairman Ben Bernanke in a speech last week. "Nothing drastic, but the news was notable enough to soften the dollar. People are getting tired and numbed by rhetoric and they are looking for signs of action," said Brad Bechtel, managing director at Faros Trading in Stamford, Connecticut. Link this Share this Digg this Email Reprints

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