NEW YORK: The euro crept back from a two-week low on Monday as profit-taking in the dollar offset data highlighting the diverging paths of the US and European economies.
But fears over Greece's progress in completing a debt- restructuring deal were expected to keep the single currency under pressure this week. In addition, Chinese Premier Wen Jiabao's reduction in his country's annual growth target to 7.5 percent, the lowest rate in eight years, also highlighted concerns about the global economy.
The Australian and New Zealand dollars, which are closely correlated with global growth, slumped.
China's central bank governor, Zhou Xiaochuan, meanwhile, told the official Xinhua news agency on Monday that China will allow the yuan exchange rate to float in a wider range.
A sharp downturn in business activity in Spain and Italy dragged the euro zone's private sector back into decline last month, while growth in the vast US services sector accelerated in February to its fastest pace in a year.
The euro fell to $1.3158, its lowest level since Feb. 17, after the release of dismal euro-zone data. That level represented a key technical support, the 38.2 percent Fibonacci retracement of the euro's Jan. 24 high of $1.3486.
"When you come to this pivotal area, it needs a catalyst to push it through. But we are drifting here until further headlines so traders are playing the technicals," said Eric Viloria, senior currency strategist at Forex.com in New York.
The euro rebounded to trade up 0.1 percent at $1.3219 in late New York activity .
With many investors nervous about Greece's bond swap and uncertainty about the level of private participation, the euro will likely remain below the Jan. 24 peak.
"I would not read too much into the euro's bounce as there are plenty of headwinds this week," said Charles St-Arnaud, foreign exchange strategist at Nomura Securities in New York.
This week features 10 global central bank meetings, including those of the European Central Bank and the Bank of England. In the United States, Friday's release of the monthly jobs report will be a major driver of risk appetite.
Nervousness over whether Greece will complete a bond exchange with private creditors by the Thursday deadline, which is critical to securing a 130-billion-euro ($172 billion) bailout deal and avoiding a messy debt default, should keep the euro under pressure this week.
"Having topped up at around $1.35, the euro is likely to drift lower with the new range likely to be at $1.25-1.30," said Steve Barrow, head of G10 currency research at Standard Bank.
In other currencies, China's lowered target for its growth rate drove trends on Monday, with the Australian and New Zealand dollars last trading 0.66 percent and 1.07 percent lower against the dollar, respectively.
China's announcement of a wider trading band on the yuan was seen a positive move. Beijing's currency practices have been a bone of contention among US politicians, and some have accused China of manipulating its currency in order to enjoy a significant trade advantage.
"China's announcement is a step in the right direction for a more freely floated currency and the internationalization of it," a strategist said. "More demand for the yuan would raise the prospect of it becoming a currency reserve asset."
China has set a 0.5 percent daily trading band, both up and down, for the yuan and the US dollar in the onshore market, and a 3 percent daily band between yuan and non-dollar currencies.
YEN SELL-OFF STALLS
Against the yen, the dollar slipped from a nine-month high on Monday, after rising more than 7 percent in about a month.
Latest positioning data from the Commodity Futures Trading Commission showed that the sharp yen sell-off coincided with a reversal in speculative positioning that has flipped to net short positions.
Analysts said with speculators now positioned for a weaker yen, more losses were likely to be small, especially given that US interest rates would not rise in a hurry. Dollar/yen has a tight relationship with the two-year spreads between the US Treasuries and Japanese government bond yields.
The dollar last traded down 0.33 percent versus the yen to 81.52 yen, retreating from Friday's high of 81.873 yen. The dollar's next major hurdle is seen at the 100-week moving average around 82.10 yen, according to Reuters data.
Comments
Comments are closed.