Euro falls below $1.12 as U.S. data outperforms

The euro fell to a three-and-a-half week low and stood precariously near its weakest since June 2017 on Tuesday as investors seized on relatively strong data out of the United States to buy the dollar.

Survey data on Monday showed factories in the euro zone had their worst month for almost six years in March, while economic data in the United States offered more hope.

That reinforced concerns that while both economies face a slowdown, the euro region looks set to come out worse.

Kit Juckes, a strategist at Societe Generale, said that while there was little correlation between the gap in the Purchasing Managers Index surveys in the euro zone and the United States, signs of weakness would test the single currency as it fell towards the bottom of its recent trading range.

“The market is bearish and short, the poor data are not unexpected, but even so, a break-through 1.1150 dollar would surely trigger short-term stops,” he said.

The euro weakened 0.2 per cent to 1.1190 dollar, slightly above the 1.1176 dollar level reached last month – the weakest since June 2017.

The dollar index, which measures the U.S. currency against a basket of rival currencies, rose 0.3 per cent to 97.430, a three-week high helped by a rally in U.S. stocks on Monday and the more positive U.S. data.

Australia’s dollar shed 0.6 per cent to 0.7072 dollar as investors focused on the central bank’s caution about the health of the global economy.

The Reserve Bank of Australia’s stress on the “downside risks for the global growth environment” probably caused the currency to weaken, said Commerzbank analyst Esther Reichelt.

She said the government’s budget due on Tuesday should provide some supportive measures. Combined with optimism over China, she said, that should help the Aussie to rebound.

Sterling dropped half a per cent after lawmakers rejected four Brexit proposals, heightening Britain’s uncertainty just 10 days before it is due to leave the European Union.

The pound was down at 1.3040 dollar at 0900 GMT and at 85.88 pence against the euro.

The safe-haven Swiss franc held below 1.12 per euro and near 2019 highs. It traded 0.1 per cent higher at 1.1194, below 2019 highs of 1.117.

RBC Capital Markets strategist, Adam Cole, said he did not expect the franc to hold its gains because the Swiss National Bank remained “sensitive” to a stronger currency, particularly when it traded beyond 1.12 francs per euro.  (Reuters/NAN)

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