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Weak data drags euro down to 2-week lows
THE euro huddled at a two-week low against the dollar on Thursday as weak euro zone data pulled the single currency below a key market level, while the pound stabilised as British policymakers seek consensus on how to exit the European Union.
"Euro zone data has been quite disappointing and that is prompting the euro to underperform the struggling dollar in the opening weeks of the year," said Alvin Tan, a currency strategist at Societe Generale in London.
The euro held at US$1.1398, broadly flat against the dollar. It briefly hit a low of US$1.1371 in the Asian session, its lowest since Jan 4. The single currency has fallen 1.7 per cent over the last week.
Data this week showed the German economy grew by 1.5 per cent in 2018, the weakest rate of expansion in five years, while euro zone inflation data earlier showed price pressures receding further from the central bank's target, complicating the situation for the European Central Bank which currently expects to raise interest rates later this year.
Britain's pound was broadly flat at US$1.2872, as Prime Minister Theresa May searched for a last-minute exit deal to break the impasse over how to quit the European Union.
The euro's weakness comes at a time when the dollar itself has struggled to gain momentum after an unlikely five rise last year with market watchers growing more pessimistic about the greenback's outlook.
On Jan 10, the dollar almost fell below its 200-day moving average when the index touched a three-month low of 95.029. Since then it has rebounded but is still down 0.1 per cent so far this month.
Long dollar, or buying and holding the dollar, was the most-crowded trade in Bank of America Merrill Lynch's monthly fund manager survey for the second straight month in January.
"We think the dollar is actually subject to downside risk because the market is still very long the currency and at the same time the dollar is likely to lose its rate advantage due to the Fed being closer to a pause in its tightening," said Manuel Oliveri, currency strategist at Credit Agricole in London.
The New Zealand dollar led losers as weak economic data was compounded by general lack of risk appetite across the board. The kiwi fell 0.7 per cent to US$0.6732.
Renewed worries about the damage a Sino-U.S. trade dispute could do to global growth had investors fleeing risk assets. The Japanese yen, considered a safe-haven currency by investors, gained 0.3 per cent and last changed hands at 108.78 yen per dollar. REUTERS