Reuters: US Dollar Report: FOREX-Euro edges lower vs dollar, yen on poor euro zone data

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FOREX-Euro edges lower vs dollar, yen on poor euro zone data Apr 2nd 2013, 13:21 Tue Apr 2, 2013 9:21am EDT * Yen pulls back from one-month highs vs dollar, euro * Investors await easing measures from BoJ * Euro zone manufacturing PMI weak, Cyprus worries linger By Gertrude Chavez-Dreyfuss NEW YORK, April 2 (Reuters) - The euro slipped against the dollar and yen on Tuesday, pressured by euro zone data showing the region was well into contraction territory last month. This has prompted expectations European Central Bank President Mario Draghi would strike a more dovish tone at Thursday's monetary policy outlook meeting and could provide hints about a possible rate cut. "The data does ... confirm that the outlook for the Eurozone has deteriorated over the last month on almost all fronts, including economic, banking sector and EMU (European Monetary Union) perspectives," said Camilla Sutton, chief currency strategist, at Scotiabank in Toronto. "We expect euro zone fundamentals to deteriorate further - this combined with outflow pressures should keep the euro's downward trend intact," she said. Sutton added that she expects the euro to close the year at the $1.25 level. Traders reported thin liquidity in major currencies as European markets reopened after the Easter holiday, and said price moves were expected to be subdued. The euro was last down 0.1 percent against the dollar to $1.2834, hovering within sight of a four-month low of $1.2750 hit last week. Euro zone purchasing managers' surveys added to concerns about the single currency's outlook by showing a deepening decline in manufacturing activity in March, with Italy and Spain particularly weak. The euro zone's unemployment rate rose to 12 percent in February, data showed, which analysts said was a record high. Europe's common currency was expected to stay below chart resistance at the March 23 high around $1.3050, also due to concerns about Cyprus' bailout and possible ramifications for other indebted euro zone countries. Analysts have identified Slovenia as possibly the next euro zone candidate for a bailout. Investors were also cautious before Thursday's ECB meeting. Although interest rates are expected to be left on hold, analysts saw a small chance of a cut. The yen, meanwhile, steadied against the dollar on Tuesday, pulling back from one-month highs hit earlier in the session, as expectations of monetary easing in Japan later this week curbed demand. The dollar was flat on the day at 93.20 yen. It was lifted by reported Asian central bank demand after earlier hitting 92.57 yen, its lowest since March 1, following lackluster U.S. factory data on Monday. Analysts said investors were likely to use gains in the yen as an opportunity to sell it at higher levels before an April 3-4 Bank of Japan policy meeting. The BoJ is widely expected to ramp up its bond buying and to extend the maturities of the bonds it purchases under new Governor Haruhiko Kuroda. But the market has already priced in hefty easing measures, making it hard for policymakers to surprise investors. "We need to see aggressive, bold and clear language from the BOJ for the dollar to re-break 94.30 yen and suggest that this technical damage has been reversed," said Hans Redeker, head of global foreign exchange strategy at Morgan Stanley in London. The euro dipped 0.1 percent against the yen to 119.60 yen , paring losses after hitting a five-week low of 119.15 yen. Chart support for the euro was seen at its late February low of 118.74 yen. Link this Share this Digg this Email Reprints

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