The euro weakened to a three-week low against the dollar in European trading Thursday after figures showed the euro-zone economy contracted at the fastest pace in nearly four years and demand for the buck grew ahead of a meeting of global foreign exchange policy makers.
The euro fell as low as $1.3315 and weakened against other major currencies after data showed a 0.6% reversal of euro-zone economic growth in the fourth quarter compared with the previous three months.
"[The] bigger-than-expected fall in euro-zone gross domestic product underlined the fact that, while sentiment toward the region has improved, the hard news on the economy remains distinctly weak," said research house Capital Economics in a note to clients.
Also in focus was a meeting of Group of 20 industrial and developing nations' finance ministers and central bank governors that is set to kick off in Moscow before the weekend. It comes amid tensions over a potential round of competitive devaluations following the yen's recent slump.
The Group of 7 industrialized economies issued a statement this week to try to ease concerns over the so-called currency war but investors were loathe to put on big currency bets ahead of the G-20 meeting, keeping a lid on volumes, said traders.
In overnight comments, the Bank of Japan's outgoing Governor Masaaki Shirakawa said the country's recent policy easing wasn't aimed at guiding the yen exchange rate. That modestly helped strengthen the currency against the dollar after the BOJ, as expected, left its key monetary policy unchanged, but analysts said the move in the yen was likely to be short-lived.
"Sideline comments [from the G-20 meeting] on excessive yen weakness are likely from individual representatives, but with markets increasingly unimpressed, dips in the dollar's rate against the yen are likely to be shallow and short-lived," said currency strategist Adam Cole of RBC Capital Markets in a note to clients.
The dollar traded with a firm tone across the board, with the ICE Dollar index motoring to a one-month high. Sterling continued its recent bad form, trading below the $1.55 mark for the first time since Aug. 2. If derivative pricing is a guide, the pound is likely to fall further in coming weeks, with the cost of sterling options surging to their highest levels since last August.
The New Zealand dollar jumped to its highest level since July 2011, trading as high as $0.8516 after consumer confidence and purchasing managers' index data overshot consensus forecasts.
The Hungarian forint weakened after data showed the Hungarian economy contracted 2.7% in the last quarter of 2012, undershooting analyst expectations for a 2% drop. The euro jumped to 292.63 forints after the data release.
At 7 a.m. ET, the euro traded at $1.3324, compared with $1.3453 late Wednesday in New York, according to trading system EBS. The dollar was at ¥93.25, compared with ¥93.83. The pound was at $1.5509, compared with $1.5536 late Wednesday in New York.
The Wall Street Journal Dollar Index, which tracks the dollar against a basket of currencies, was trading at 71.864, compared with 71.555 late Wednesday in New York.
