Euro nurses losses; Aussie drops in London

The euro nursed losses on Thursday and was vulnerable to a further drop after weak eurozone data revived worries about a recession in the region while disappointing data from China dented the higher-yielding Australian dollar. Purchasing managers' surveys revealed unexpected declines in euro zone manufacturing and services activity in March, hit by a sharp fall in French and German factory activity.
That drove the euro to session lows against the dollar and the yen. Against the dollar, the euro fell to $1.3133, triggering stops below $1.3140. It pared some of those losses to trade at $1.3160, still down 0.4 percent on the day, and dealers could not rule out further potential losses towards a recent trough around $1.3004. Against the yen, the euro was down 0.9 percent at 109.15 yen, having dropped to a one-week low of 108.79 on trading platform EBS, as some long-term investors stepped up selling of the common currency after the PMI surveys. That was a far cry from the euro's near five-month high of 111.43 yen struck on Wednesday.
"When you get numbers like this out of the euro zone it definitely puts the growth outlook into question and points to a mild recession," said Niels Christensen, currency strategist at Nordea in Copenhagen. However, the euro would need to break below $1.30 to take it out of the $1.30-$1.35 trading range it has been in for the last couple of months. A bigger sell-off in equities may be needed to prompt this, Christensen said.
Analysts said the poor PMI surveys highlighted the risk of a recession in the euro zone and peripheral debt showed fresh signs of struggling. "The PMI numbers have taken the wind out of the sails for risk," said Peter Kinsella, currency strategist at Commerzbank. "It is negative for the euro and reminds investors that despite the recent progress on the debt front, there are challenges for the region."
That weighed on growth-linked currencies, especially the Australian dollar given the country's close trading links with China. It slid nearly 1 percent versus the US dollar to hit a two-month low of $1.0356. The Aussie has fallen nearly 3.5 percent this month amid broader dollar strength. On Thursday, it breached major support at the 200-day moving average of $1.0402, with more chart support located at the base of the Ichimoku cloud - a popular technical indicator - at $1.0354.
The higher-yielding Aussie also lost 1.3 percent against the yen and earlier hit its lowest in nearly three months against the euro as investors unwound carry trades, where money is borrowed in lower-yielding currencies to fund riskier investments elsewhere. The yen was helped after data from Japan showed the country unexpectedly logged a trade surplus of 32.9 billion yen in February, against a forecast 120 billion yen deficit. The dollar was down 0.5 percent against the Japanese currency at 82.95 yen, pulling away from a recent 11-month high of 84.187. Japanese importer bids are said to be at 82.50-70 yen while exporter offers are cited at 83.50.