Euro edges higher after PMI data; Aussie dollar falls

London

THE euro edged higher on Thursday after surveys showed business activity was surprisingly firm in February, particularly in France, while the Australian dollar fell after a Chinese port banned imports of the country's coal.

French business activity rose more than expected as manufacturing growth helped offset the slack in services that has dogged firms in the wake of anti-government protests, though the German PMI number was more of a mixed picture.

The euro initially rose as much as 0.2 per cent to the day's high of US$1.1364 after the PMI data before retracing some gains to stand 0.1 per cent up on the day.

"The euro's reaction highlights the heightened sensitivity of the currency towards any good news from Europe after recent lacklustre data," said Kamal Sharma, director of G10 FX strategy at Bank of America Merrill Lynch in London.

A bunch of weak data since January has undermined support for the single currency, prompted investors to revise down their inflation expectations for the coming months and pulled core bond yields lower.

A Citibank economic surprise index shows the euro zone indicator is still wallowing near six-month lows hit last month.

Morgan Stanley's ETF tracker indicates purchasing of euro zone equities on a FX hedged basis has grown to its highest levels since August 2015, a sign of growing bearishness on the single currency.

Elsewhere, the Australian dollar tumbled after customs officials at China's northern Dalian port banned imports of coal from major supplier Australia, just days after the central bank stepped back from its long-standing tightening policy bias.

The indefinite ban on coal imports from Australia, effective since the start of February, comes as major ports elsewhere in China prolong clearing times for Australian coal to at least 40 days.

The Aussie dollar fell 1 per cent to US$0.7086 in a volatile Asian trading session before retracing some losses to stand 0.7 per cent down on the day.

Broadly, the dollar index, which measures the US unit against a basket of six major currencies, added 0.11 per cent to 96.559 after minutes from the Federal Reserve's last meeting revived expectations for a US rate hike this year. REUTERS

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