Euro stumbles in London

The euro fell against the dollar on Monday after a better-than-forecast German business sentiment survey failed to alleviate concerns about eurozone growth, while investors fretted about Italian debt auctions and Spain's budget. The dollar also moved broadly higher, rising against the Japanese yen and the Swiss franc as signs of improvement in the world's largest economy lifted US bond yields and lent support to the US currency.
In Europe, the German Ifo think tank's business climate index rose to 109.8, beating expectations of a steady reading of 109.6 and suggesting Europe's large economy may be holding up despite the eurozone crisis. However, the euro rose only briefly after the data, with analysts and traders mindful that high oil prices could pose a risk to growth, especially as purchasing managers' indices last week showed German manufacturing activity shrinking.
"Ifo data at 0.2 away from consensus is not a strong number. The PMIs are more forward-looking and retail sales across Europe have been awful," said Maurice Pomery, managing director at consultants Strategic Alpha. The euro was down 0.15 percent at $1.3253, having risen briefly to around $1.3262 after the Ifo survey was released. However, it was off a session low around $1.3192, when traders said Middle-Eastern investors were big sellers, with reported bids at $1.3150 expected to prop it up for now.
Even so, after the euro failed to breach resistance last week at $1.3302, the 61.8 percent retracement of its late February to mid-March fall, analysts said the bias was for more losses. Traders also cited talk of an options barrier at $1.33. The euro faced a slew of risk events this week, including bond auctions in Italy, a meeting of eurozone finance ministers and Spain's budget on Friday. Italy is seeking to raise up to 7.5 billion euros amid renewed pressure on peripheral eurozone debt.
Worries are also growing about Spain after a government setback in regional elections, making Prime Minister Mariano Rajoy's task of pushing through harsh spending cuts more difficult. "The German Ifo data did give the euro a bit of a leg higher, but it also highlighted the dichotomy between the German economy and the strugglers in the eurozone periphery," said Steve Barrow, G10 currency strategist at Standard Bank.
The dollar advanced against the Japanese currency, gaining 0.8 percent to 83.008 yen and inching closer to an 11-month high of 84.19 struck on March 15. Traders said they would prefer to buy the dollar and sell the yen, with repatriation inflows ahead of the Japanese fiscal year-end on March 31 unlikely to change the bearish sentiment towards the Japanese currency over the medium term. "We are expecting the dollar/yen pair to trade in a 80-85 yen range with a risk of an upside break. A lot will depend on whether the economies outside the US also pick up," said Paul Robson, currency strategist at RBS Global Banking. The dollar index, a gauge of its performance against a basket of major currencies, rose 0.1 percent to 79.459, having recovered from a two-week low last week.