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Euro lower on poor economic surveys

Friday, September 21 07:28:25

The euro nursed losses today, having suffered its biggest one-day fall in over a month after a batch of surveys showed euro zone business activity remained weak despite the European Central Bank's recent bold efforts to tackle the debt crisis. The single currency stood at $1.2972, having fallen over 0.6 percent on Thursday to a one-week trough around $1.2920. It has shed about 2 percent since scaling a four-month peak of $1.3173 on Monday. Immediate support is seen near $1.2905, the 23.6 percent retracement of its July-Sept rally.

The euro also lost ground against the Australian dollar, sliding to a one-week low of A$1.2405. "The single currency may likely face additional headwinds over the near-term as the debt crisis continues to drag on the real economy," said David Song, Currency Analyst at DailyFX. "At the same time, there's growing speculation that Greece will ultimately need to restructure its debt once again as the government struggles to secure the next bailout payment." Indeed, Greek officials said on Thursday that international lenders discussing Greece's bailout could leave Athens at the weekend without a final agreement on some 12 billion euros of planned spending cuts.

The pullback in the euro saw the dollar index bounce to a one-week high of 79.660, well above a six-month trough of 78.601 set last Friday. It last traded at 79.401. Commodity currencies seesawed, with the Australian dollar skidding to a 1-1/2 week low of $1.0368 before a wave of short-covering squeezed it back to $1.0431. Manufacturing surveys from China to the United States added to the gloom and underscored the difficulty facing global policymakers, who have tried to increase growth with aggressive monetary stimulus.

The Bank of Japan, which only on Wednesday expanded its bond-buying programme, would be unhappy to see the yen strengthening as investors once again sought safety. The yen rose against most currencies except the greenback, which also gained as risk appetite waned. The euro fell to 101.50 yen, retreating from a four-month peak of 103.86, while the Australian dollar dipped to 81.61, pulling back from a recent high of 83.08. There are no major data releases on Friday, but traders said the market will keep an eye on Spain to see if it will request a bailout and trigger the ECB's new bond-buying programme. Traders pointed to a Financial Times report, which said EU authorities are working behind the scenes to pave the way for a new rescue programme for Spain. ( C) Reuters