Euro falls as Germany's business morale darkens

London

THE euro fell on Wednesday (Nov 24) after a survey showed German business morale deteriorated in November, while the Turkish lira remained under pressure as President Tayyip Erdogan defended rate cuts despite surging inflation.

German business sentiment worsened for a fifth month as supply challenges in manufacturing and a spike in coronavirus infections clouded the growth outlook for Europe's largest economy, according to the Ifo Institute.

At 1145 GMT, the euro was down 0.3 per cent at US$1.1216, close to its lowest level of US$1.1203 since early July 2020, touched in earlier London trading. One-month implied euro volatility rose to the highest level since January. Analysts said the euro could weaken further if Germany implements new Covid-19 restrictions, after neighbouring Austria re-imposed a full lockdown.

Chancellor Angela Merkel, who is preparing to hand over to a new government of Social Democrats, Greens and Free Democrats, called in the leaders of these parties on Tuesday to discuss the pandemic. Germany registered almost 67,000 new coronavirus infections.

In the meantime, the beaten down Turkish lira eased after hitting an all-time low of 13.45 versus the US dollar on Tuesday, when it fell around 15 per cent on the day after Erdogan defended recent rate cuts. It last traded up 4.1 per cent against the dollar at 12.15. There is widespread criticism from those calling for action to reverse the slide in the currency, which has hit 11 consecutive sessions of record lows.

The US dollar continued its upward trend on renewed bets the Federal Reserve will hike rates to tame inflation. The index rose 0.2 per cent to 96.680 after touching a fresh 16-month high at 96.758 ahead of minutes of the November Federal Reserve Open Market Committee meeting, and after a surge that followed the re-nomination of Fed Chair Jerome Powell.

The dollar has climbed versus the yen to levels not seen since 2017, hitting 115.23 overnight.

A slew of US data, including jobless claims, growth and the Fed's preferred inflation measure, are due later on Wednesday ahead of the Thanksgiving holiday on Thursday.

Overnight, the New Zealand dollar was the biggest mover in an otherwise quiet Asian session. It was last down 0.65 per cent to US$0.6908 after a smaller-than-expected rate hike by the Reserve Bank of New Zealand. REUTERS