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Euro slides to two-month low on growth fears


THE euro skidded more than half a per cent to its weakest since Aug 20 on Wednesday after signs that economic growth could be slowing across the eurozone.

Eurozone business growth slowed much faster than expected this month, a widely-watched Purchasing Managers Index (PMI) survey showed.

German private-sector growth slowed to its lowest level in more than three years, and manufacturing in France hit a 25-month low, according to other surveys.

The single currency, earlier trading flat, dropped to as low as US$1.1402 after the surveys were published.

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The euro also fell 0.4 per cent against the Swiss franc to 1.1372 francs, a two-week low.

"Particularly the German PMI was disappointing ... The environment for the euro is getting more difficult," said Thu Lan Nguyen, a Frankfurt-based strategist at Commerzbank, pointing to a dispute over Italy's spending plans and concerns about the bloc's growth outlook.

The European Central Bank holds its monetary policy meeting on Thursday, and investors will be looking for any comments about the deepening row between the European Union and Italy over Rome's budget.

Weakness in the single currency supported the dollar, which rose 0.4 per cent against a basket of currencies to 96.380 .

The Japanese yen - often bought when broader markets slide - gave up its earlier gains, suggesting some renewed demand for risk-taking as stock markets rebounded on Wednesday.

The yen edged 0.2 per cent lower to 112.65 yen per dollar, but remains almost 2 per cent up since Oct 4.

Big falls in stock prices have shaken foreign exchange markets this week, with the yen the main gainer, as investors weigh up whether equity weakness is a major correction or just another wobble in a nearly decade-long bull-market run.

The S&P 500 is on course for its worst performance since at least August 2015.

"There are good reasons why you would want to be cautious," said Simon Derrick, chief currency strategist at BNY Mellon, citing the Italian budget and US President Donald Trump's criticism of the Federal Reserve over interest rate rises.

Worries about Italy, fears about ebbing world growth, global trade wars and political tensions between Saudi Arabia and the West are spooking investors. REUTERS

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