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Euro struggles near 3-year lows on economic worries
THE euro struggled near three-year lows on Monday as investors worried about weakening growth in the region, while Chinese efforts to limit the damage from the Covid-19 outbreak appeared to calm markets, with the yuan and Australian dollar gaining.
Monday is light on economic data but traders are looking to a German business sentiment indicator due on Tuesday and purchasing managers index flash data later this week for further evidence on the state of the eurozone economy. Last week, data showed momentum in powerhouse economy Germany struggling in particular.
"EUR/USD seems to be comfortably trading around its new lows and in the next few days we expect to see a continuation in the recent downtrend rather than any clear rebound," said ING analysts. "The fears around the coronavirus impact on the eurozone economy remain well in place while data this week should be in line with latest releases in providing a non-encouraging picture." The euro nudged higher to US$1.0845 in early trading but had earlier touched US$1.0817, its weakest since mid-2017.
Elsewhere the yen was largely unfazed by weak economic growth data. It traded down 0.1 per cent at 109.84 yen per dollar.
The world's third-largest economy shrank 1.6 per cent in the three months to December, the largest drop in six years, hit by sales tax hike.
Most market players expect growth in the United States to remain stronger among the developed world, although data published on Friday provided a mixed picture.
US core retail sales was flat last month, lagging expectations of 0.3 per cent growth while its rise in December was revised down to 0.2 per cent from a previously reported 0.5 per cent. Industrial production also shrank more than expected by 0.3 per cent. Still, economists have blamed one-off factors such as warm weather and output suspensions stemming from troubles at Boeing for the downbeat numbers.
The dollar index stood at 99.131, near Friday's 41/2-month high of 99.241.
The Australian dollar edged up as investors assessed the latest reading on Covid-19 cases in China's Hubei Province, the epicentre of the outbreak. The Australian dollar ticked up 0.1 per cent to US$0.6724. The currency, which is used as a proxy for risk on Chinese assets because of Australia's high trade exposure to the Asian giant, has partly been supported by expectations of stimulus from Beijing.
The offshore Chinese yuan also rose, trading 0.1 per cent higher at 6.9835 per dollar.
Sterling was little changed at US$1.3046. REUTERS