* Euro zone manufacturing contracts again in March
* Euro pressured again on outlook
* Yen gains, recovering from early losses
NEW YORK, April 2 (Reuters) – The euro slid against the
dollar and yen on Monday as weak European manufacturing data
prompted investors to compare the outlook for the euro zone with
the improving U.S. economy.
The euro remained vulnerable to renewed bouts of selling
after the regional manufacturing survey,
analysts said, as investors took a cautious view of prospects
for the global economy even after strong Chinese factory data
.
A report on business activity in the U.S. manufacturing
sector came in above the consensus forecast,
further contrasting the U.S. against the euro zone.
“PMIs out of Europe are another reminder of the extent
economies have gone down,” said Omer Esiner, chief market
analyst with Commonwealth Foreign Exchange in Washington, D.C.
“Strong U.S. data this week is likely to see the dollar
strengthen on rising yield appeal.”
The euro fell 0.3 percent against the dollar to $1.3311
, though still within a cent of the recent one-month high
of $1.3385, according to Reuters data. Analysts said that peak
will provide resistance after the euro has repeatedly failed to
breach it.
Traders said negative sentiment towards euro zone assets
arose on reports the Bundesbank would not accept the bonds of
several countries, including Portugal, as collateral. Germany’s
central bank later denied the reports.
“There’s an increasing risk of a more prolonged recession in
Europe and economic fundamentals argue in favour of a further
downward adjustment in the euro,” said Lee Hardman, currency
analyst at BTM-UFJ in London.
YEN GAINS
The low-yielding yen, which tends to fall when risk appetite
increases, recouped earlier losses, with the dollar down 0.9
percent at 82.09 yen and the euro down 1.1
percent at 109.26 yen.
“It seems like investors remain cautious with service sector
data from China still to come this week and nothing to indicate
an imminent policy response from the Chinese to the slowdown in
their economy,” said Valentin Marinov, head of European G10
currency strategy at Citi in London.
“It’s a week ahead of the long weekend with thin liquidity,
making investors reluctant to express strong views and
which limits the scope for meaningful returns ahead of Easter.”
The Japanese currency was undermined by a
weaker-than-expected reading of the Tankan survey of sentiment
at big Japanese manufacturers, which put the spotlight on
whether the Bank of Japan will ease monetary policy further as
early as next week.
The Australian dollar was up around 0.8 percent for the day
at $1.0416, though off a high of $1.0449 touched earlier in the
global session.
The currency tends to benefit from any signs of improvement
in the Chinese economy due to Australia’s strong trade links
with the country. But many analysts have recently expressed
concerns it is overvalued.
“The Chinese recovery is modest … We like to sell Aussie
on any rally,” said George Saravelos, G10 currency strategist at
Deutsche Bank in London.
