Friday, March 01 07:25:45
The euro steadied in Asian trade today, a day after its biggest monthly fall against the dollar in nine months, as investors took slightly disappointing Chinese factory data in stride.
The single currency's upside remained capped as political uncertainty in Italy and impending U.S. government spending cuts sapped some investors' appetite for risk.
China's February official purchasing managers' index (PMI) showed manufacturing activity at its slowest pace in four months at 50.1, slightly below a 50.2 Reuters poll consensus and the 50.4 posted in January.
HSBC's final PMI for the same month showed activity fell to 50.4 after seasonal adjustments from January's two-year high of 52.3, in line with a flash reading in late February.
"The Chinese data wasn't as good as some had expected, and while usually risk-off sentiment doesn't help the euro, it didn't prove to be a major factor in Asia," said Ayako Sera, market economist at Sumitomo Mitsui Trust Bank in Tokyo.
"Sentiment toward the euro is calmer but the situation is still unclear in Italy, and investors are waiting for fresh developments there," she added.
The euro was at $1.3065, up about 0.1 percent and holding above a seven-week low of $1.3018 hit earlier in the week. A break of that level would bring into focus its 2013 low of $1.2998.
The euro lost about 4 percent against its U.S. peers in February, its biggest monthly slide in nine months.
Against the yen, the euro rose slightly to 120.92 yen .
The yen, usually bought in times of heightened market stress, continued to underperform a day after Prime Minister Shinzo Abe nominated an advocate of aggressive policy action to head the Bank of Japan.
Government data on Friday underscored the challenge faced by the BOJ to vanquish deflation and achieve its new target of 2 percent inflation, with core consumer prices skidding for a third straight month in annual terms in January.
The dollar's gains against the yen slightly unravelled toward the end of the Asian session, with the greenback buying 92.51 yen, down 0.1 percent and heading away from its 33-month peak of 94.77 set on Monday.
Traders said benign inflation data on Thursday gave the European Central Bank room to cut interest rates, which further diminished the allure of the euro.
"Our economists have revised their view and now expect a 25 basis point cut in the ECB's refi rate either next week or in April," said Vassili Serebriakov, a strategist at BNP Paribas.
Serebriakov said this suggested downside risks for the euro and the bank's trade recommendation for a long position in euro/dollar, established at $1.3180, with a stop-loss order placed at $1.2980.
"However, we would argue that a refi rate cut would probably be least damaging for the euro, as compared to other potential forms of easing such as cutting the deposit rate to negative." ( C) Reuters