Reuters: US Dollar Report: FOREX-Euro touches one-month peak after euro zone PMI surprise

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FOREX-Euro touches one-month peak after euro zone PMI surprise Jul 24th 2013, 12:29 Wed Jul 24, 2013 8:29am EDT * Euro rises to one-month high * German and French PMI surveys support euro * Aussie falls as HSBC's China flash PMI hits 11-mth low NEW YORK, July 24 (Reuters) - The euro climbed to a one-month high against the dollar on Wednesday, buoyed by faster-than-anticipated expansion in German private sector business activity, a sign of recovery in the euro zone economy. The euro zone news contrasted with weaker Chinese PMI data which earlier triggered safe-haven inflows into the U.S. dollar and toppled the growth-linked Australian dollar from a four-week high. German and French PMI surveys both beat expectations and led some investors to trim bets against the euro. Overall, the business polls indicated that the euro zone economy was likely to grow in the current quarter. "The news out of Europe was decidedly better with (euro zone) Flash PMI Manufacturing data popping above the 50 boom/bust line for the first time in two years," said Boris Schlossberg, managing director of FX Strategy at BK Asset Management in New York. "The improvement in Manufacturing was driven by Germany and the periphery economies, indicating that the region's long drawn out recession may be coming to an end." Amid thin volumes, the euro rose to $1.3254, its highest since June 20. It was last trading at $1.3246, up 0.2 percent on the day, with offers to sell cited above $1.3260/70, especially from Asian central banks. Some US$3.4 billion in euros changed hands, based on Reuters data. But given "forward guidance" from the European Central Bank that it will keep monetary policy accommodative and perhaps even lower rates to boost growth, any euro gains are likely to be held in check, traders said. "The PMI data has pushed the euro up," said Chris Walker, currency strategist at Barclays in London. "But we are still short euros as ultimately euro/dollar is a relative monetary policy play. A rise above $1.33 is a sell." In contrast to the ECB, the U.S. Federal Reserve is considering scaling back its ultra-loose monetary stimulus as the U.S. economy outperforms. That has led to a widening in spreads between U.S. Treasury and German Bund yields. While spreads have narrowed since Fed chief Ben Bernanke indicated any slowing of stimulus would be data-dependent, the gap between the benchmark 10-year bonds remains near its highest in almost seven years. The euro's rise pushed the dollar index toward one-month lows. The index, which measures the dollar's performance against a basket of currencies, was trading at 81.995, not far from Tuesday's one-month low of 81.926. The dollar index had risen in Asian trade, helped by safe-haven inflows after the July flash HSBC/Markit Purchasing Managers' Index for China came in at an 11-month low and dampened appetite for risk. "What we are seeing is more evidence of emerging markets slowing down while the developed economies are holding up well," said Alvin Tan, currency strategist at Societe Generale. "What this means is that the dollar and the euro will be preferred over emerging market-related currencies like the Aussie. Between the euro and the dollar, the latter should outperform, but today's euro zone data has surprised us." The Australian dollar, which is sensitive to economic data from China, Australia's biggest export market, fell sharply after the Chinese PMI data. It was last trading 0.8 percent lower at $0.9226, down from an intraday high of $0.9317. The dollar was 0.7 percent higher against the yen at 100.09 yen. Link this Share this Digg this Email Reprints

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