WSJ:WORLD FOREX: Risk Currencies Hit By Weak China Data, France Fears
-- China HSBC flash PMI shows manufacturing contracting
-- Euro tumbles on Belgian newspaper report on Dexia deal
-- Report re-kindles doubts about France's AAA rating
By Martin Vaughan
Of DOW JONES NEWSWIRES
SINGAPORE -(Dow Jones)- Disappointing China manufacturing data weighed on the euro and Asian currencies Wednesday, in a market where risk currencies were already struggling under fears that Europe's sovereign debt crisis would deepen.
China's November HSBC preliminary manufacturing PMI fell 3 points to a 32-month low of 48.0, back below the 50-point line that denotes a contraction.
The poorer-than-expected signal from China dragged regional currencies like the Australian and New Zealand dollars lower.
"If there was one thing we could hope to count on in these dark and unsettled times, it was that China's economy would continue to tick along. Reports like this obviously put a fair amount of dent into those hopes and sentiments," said Chris Hunter, corporate dealing manager at Western Union Business in Auckland.
The euro tumbled earlier in the day on a report in Belgium's De Standaard newspaper that Belgium, unable to meet the terms of the rescue plan for Franco-Belgian bank Dexia, is asking France to renegotiate and a greater French burden is a "possible outcome." The report, which didn't cite any sources, said Belgian and French officials denied they are renegotiating the dismantling of Dexia.
The report rekindled talk that France's AAA credit rating might be in danger.
The euro slid as low as $1.3452 after trading at $1.3531 early in the Asian session, where Japanese markets were shut for a holiday. The single currency stabilized around $1.3460 where it found support for much of the day. Strategists said repatriation of Asian and Eastern European assets by European banks helped put a floor under the euro.
"It's really more the implication about France that has shaken the market, which has already been quite shaken the last few days," said a Singapore trader at a foreign bank, referring to declines in such currencies as the Singapore dollar and Thai baht.
The New Zealand dollar was trading at $0.7448, after falling to an eight-month low of $0.7426. The Aussie dollar was fetching $0.9763, from $0.9831 early in Asia.
The U.S. dollar powered higher on the heightened risk aversion, including against the safe haven Swiss franc. It was fetching CHF0.9163, up from CHF0.9142 late in New York. The dollar also gained mildly against the yen, to trade at Y77.07 late in Asia, from Y77.03 in late New York trade.
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