NEW YORK: The euro recovered lost ground in limited trade on Monday, boosted by weaker-than-expected US housing data that softened a blow to the currency from news that German business morale fell.
The German data took the shine off better-than-expected stress-test results for European banks issued on Sunday but widely leaked at the end of last week.
US September pending home sales gained 0.3 percent, according to the National Association of Realtors, versus a 0.5 percent gain forecast in a Reuters poll of economists.
"The dollar slipped right after a little weaker-than-expected housing data and with a lack of other risk events today it was enough to push the euro back above $1.27," said John Doyle, director of markets at Washington, D.C-based Tempus Inc.
The euro traded at $1.2706, up 0.28 percent on the day . It gained 1 percent to 9.2803 Swedish crowns, the highest since early July. Expectations are Sweden's central bank will cut interest rates to a record low to ward off the threat of deflation.
Market activity was subdued ahead of this week's Federal Reserve monetary policy meeting.
The US central bank is expected to end its quantitative easing program and reinforce its stated willingness to wait a long while before raising interest rates.
German business sentiment in October fell for a sixth straight month, according to Munich-based Ifo economic think-tank.
The index fell to 103.2 from 104.7 the prior month for the weakest reading since December 2012.
The euro zone's biggest economy had steamed ahead in the first quarter but suffered a 0.2 percent contraction in the second quarter and concern is growing that Germany will slide into a recession.
The Ifo data cut into the euro's gains against the US dollar after better-than-expected results from the European Central Bank's stress tests.
Twenty-five of the euro zone's 130 top banks failed the tests at the end of last year but most have since repaired their finances, the central bank said on Sunday.
Adam Myers, European head of currency strategy at Credit Agricole in London, said he expected the euro to weaken before the Fed policy meeting set to start on Tuesday.
"The Fed has been far more cautious recently because they don't want a stronger dollar, but even so, with the market interpreting the ECB and the European data the way they are at the moment the risk is that heading into the Fed, into Wednesday evening, we're going to break through last week's low."
The dollar sank 0.38 percent to 107.73 yen, just off the session low 107.61 yen, underscoring a generally weak performance by the greenback against its major rivals.
Comments
Comments are closed for this article.