Euro sinks to one-month low amid economic stall

London

THE euro fell to its lowest in a month on Thursday after data showed economic activity in the euro zone virtually halted by government-imposed lockdowns to stop the novel coronavirus pandemic.

The single currency dropped 0.6 per cent against the US dollar to its lowest since March 24, after IHS Markit's Flash Composite Purchasing Managers' Index (PMI) sank to by far its lowest reading since the survey began in 1998.

The euro was last at US$1.07795, with investors awaiting the result of a meeting of European Union (EU) leaders on the bloc's response to the economic turmoil caused by the pandemic.

The summit will bring a move towards joint financing to help the bloc recover from a forecast deep recession caused by the pandemic by asking the European Commission to propose a fund big enough to target the most affected sectors and regions.

But uncertainty remains over how far EU governments will be prepared to share the burden.

"The proposed Recovery Fund could help, but a lot will depend on its size, conditions and debt mutualisation," Bank of America analysts wrote. "We do not see a strong consensus to mutualise this debt."

The euro fell 0.6 per cent against the pound to 87.7240 pence, with sterling gaining even after UK preliminary PMI readings for April fell far below even the most pessimistic forecasts.

European stocks rose 0.2 per cent, erasing earlier losses as energy shares jumped.

Elsewhere, the US dollar slipped against the currencies of oil-producing states as a bounce in crude prices gave succour to markets shaken by the massive coronavirus-induced drop in demand.

The Norwegian krone, Russian rouble and Mexican peso all gained as Brent crude rallied on tensions in the Middle East and signs that producers were cutting production to address collapsing demand for fuel.

In volatile trading, Brent crude soared as much as 15 per cent, bouncing back from its lowest level since June 1999. It was last up 9.1 per cent at US$22.23 a barrel.

The greenback fell 1 per cent against the rouble to 75.1017, and by 0.8 per cent against the krone to 10.7061, pulling back from a one-month high reached a day earlier.

Against the peso it fell 0.8 per cent to 24.4640, retreating from a two-week high hit earlier. REUTERS