LONDON: The euro fell to a two-week low against the dollar on Tuesday after weak German data fanned concerns about the euro zone economy and speculation the European Central Bank could cut interest rates. A survey showed Germany's private sector shrank for the first time in five months in April, overshadowing improvements in French data. The weak German data added to worries about the global economic outlook after earlier figures showed Chinese manufacturing growth slowed in April. This helped the yen higher and drove the commodity-linked Australian dollar to a six-week low against the U.S. dollar. The euro fell 0.7 percent to $1.29735 and threatened to break decisively out of the $1.30 to $1.32 range that has held for the past couple of weeks. "Weak German PMI data is hurting the euro and intensifying expectations of a rate cut from the ECB," said Niels Christensen, currency strategist at Nordea in Copenhagen. Comments on Monday from European Central Bank policymakers on Monday about falling inflation and poor growth prospects in the euro zone suggested the central bank may be leaning towards a cut in its main refinancing rate, which stands at a record low 0.75 percent. More losses could push the euro towards chart support at its 200-day moving average around $1.2936 and the early April low of $1.2740. But Christensen said it would take more bad news and falls in equity markets to drag the euro towards $1.28, especially as he expected the yen to continue to weaken following aggressive monetary easing by the Bank of Japan. The euro fell more than 1 percent to 127.93 yen and pulling well below its April 11 three-year peak around 131.10 yen. The yen, which typically rises when investors seek safety during times of heightened concern about the global economy, recovered broadly, with the dollar last down 0.5 percent at 98.69 yen. The dollar has faced stiff resistance at the 100 yen level, having stalled when it hit a four-year high of 99.95 yen earlier this month, but most analysts and traders still believe it is on track to scale this peak. "The dollar has tested the psychological 100 yen level twice and it will eventually be broken. I don't think the pullback will be very significant and I can't see it going below 96 yen unless equities take a real beating," Nordea's Christensen said. A focal point for the yen is whether the BOJ's aggressive monetary easing will prompt Japanese investors to increase their purchases of higher-yielding overseas assets. "Are we getting to the stage where people would like to see some support from the Japanese (investor) community? We're not seeing it yet," said Rob Ryan, Singapore-based FX strategist for RBS. He added that the yen could take its cue from the next batch of Japanese capital flows data due on Thursday. Weak Chinese data and falls in commodity prices pushed the Australian dollar down 0.4 percent to a 6-week low of $1.0221. It also lost around 1 percent against the yen

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