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Euro on the up after 8-month dollar low

Thursday, July 24 12:52:35

The euro climbed from an eight-month low today after German and French business surveys beat expectations, although the risks to the euro zone economy from any tougher sanctions on Russia curbed gains.

The French composite purchasing managers index of both the manufacturing and services sector rose to 49.4 from 48.1 in June, bringing activity closer to the 50-point line dividing growth from contraction.

German business activity also expanded in July as the services sector grew at the fastest rate in three years. But concerns that economic activity in Germany, which has strong trade links with Russia, could stumble in coming months as sanctions begin to bite were keeping many away from the euro.

The sanctions are likely to weigh on a fragile recovery and keep alive expectations of even looser monetary policy from the European Central Bank. Euro zone interest rates were slashed in June and the ECB has left open the possibility of further monetary loosening - possibly through quantitative easing.

The euro hit a day's high of $1.34855 after the euro zone "flash" composite survey was released, showing the index at a three-month high in July. The euro had fallen to an eight-month low of $1.3438 in early London trade.

The euro was also 0.2 percent higher against the yen at 136.93 yen and rose against the pound to 79.20 pence, having slumped to a 23-month low on Wednesday.

"The activity data offsets some of the weakness we saw last month and that has helped the euro," said Geoff Yu, currency strategist at UBS. "But there are concerns about domestic growth in the euro zone and possible sanctions on Russia are likely to have an impact."

The euro has also struggled to find support amid persistent expectations for further monetary easing in the euro zone and a gradual widening of interest rates favoring the U.S. over Europe. (Reuters)

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