BLBG:Euro Drops Versus Yen, Dollar as Euro-Area Industry Declines
The euro dropped against the yen and dollar after an index of euro-area manufacturing and services contracted more than economists forecast in March, boosting demand for the safest assets.
The yen advanced against all of its 16 major peers after a private report showed manufacturing may shrink in China for a fifth month, fueling concern about the global growth outlook. Australia’s currency slid to its weakest in two months. The Stoxx Europe 600 Index fell for a fourth day, slipping 1.3 percent, as separate data showed industrial output unexpectedly slid in Europe’s largest economies, Germany and France.
“The euro-zone data was disappointing in the sense that it gives maybe the first indication that really the kind of improvement that we’ve seen in the euro-zone economy is really a myth,” said Steven Barrow, an analyst at Standard Bank Plc in London. “That sentiment has obviously weighed on the euro.”
The euro weakened 1.2 percent to 108.87 yen at 9:39 a.m. London time. The 17-member shared European currency dropped 0.5 percent to $1.3146 after touching $1.3285 yesterday, the strongest level since March 8. The yen strengthened 0.7 percent to 82.94 per dollar.
A euro-area composite index based on a survey of purchasing managers in manufacturing and services dropped to 48.7 from 49.3 in February, London-based Markit Economics said in an initial estimate today. Economists forecast a gain to 49.6, according to the median of 21 estimates in a Bloomberg News survey. A reading below 50 indicates contraction.
China Manufacturing
Australia’s currency dropped for a third day after a preliminary reading of an index from HSBC Holdings Plc and Markit Economics showed Chinese manufacturing may contract. The gauge fell to 48.1 in March, the lowest level in four months and compared with a final reading of 49.6 for February. Figures below 50 indicate contraction.
The Australian dollar slid 0.9 percent to $1.0370 after falling to $1.0356, the lowest since Jan. 17. New Zealand’s currency declined 1 percent to 80.74 U.S. cents.
China is Australia’s biggest trading partner and New Zealand’s second-biggest export destination.
The yen headed for its first weekly advance in seven against the dollar after Japan’s exports exceeded imports by 32.9 billion yen in February, according to a finance ministry report today. Economists surveyed by Bloomberg had predicted a shortfall of 120 billion yen. Exports fell by 2.7 percent from a year earlier, less than the 6.5 percent drop projected.
Japanese Economy
“The data suggest that Japan’s economy is doing better,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “From a fundamental perspective, this is likely to be positive for the yen.”
JPMorgan Chase & Co. said a short-term retracement of yen declines against the dollar may be due after yesterday’s so- called “bearish reversal” where the greenback failed to advance above a key resistance area.
“We continue to monitor the 82.85/65 support zone for confirmation of that retracement,” Niall O’Connor, a New York- based technical analyst at JPMorgan, wrote in a note to clients today. A resistance level is an area on a chart where analysts anticipate orders to sell a currency will be grouped and a support level is an area where they expect buy orders to be clustered.
Implied volatility of three-month options of Group of Seven currencies rose to 10.24 percent after touching 9.91 on March 20, its lowest level since Feb. 27, according to JPMorgan’s G7 Volatility Index.
Intercontinental Exchange Inc.’s Dollar Index, used to track the greenback against the currencies of six major U.S. trading partners including the euro, yen and pound, rose 0.3 percent to 79.84 after touching 79.3 yesterday, the lowest level since March 9.
To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net.
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.
