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Euro Below $1.30 for First Time in Two Months on Unemployment

Friday, 01 March 2013 08:52 AM

The euro fell below $1.30 for the first time in two months after reports showed manufacturing contracted in February and unemployment climbed to a record.

The common currency extended a fourth weekly loss against the greenback as the data added to signs the region remains stuck in a recession and backed the case for the European Central Bank to cut interest rates. The Dollar Index rose to the highest level since August as investors sought safer assets. The pound tumbled after a British factory index unexpectedly shrank in February.

“The overall picture is consistent with a euro-zone economy that is still stuck in recession,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “There are downside risks for the euro. The ECB could signal it is closer to further monetary easing next week.”

The euro fell 0.5 percent to $1.299 at 7:28 a.m. New York time, extending this week’s decline to 1.5 percent. The single currency gained 0.2 percent to 120.51 yen, having depreciated 2 percent this week. The dollar strengthened 0.2 percent to 92.77 yen.

The 17-nation euro slid against all but one of its 16 major peers in February, losing 3.8 percent against the greenback and 3 percent against the yen. The dollar rose 0.9 percent versus the yen, a fifth monthly gain, the longest winning streak since August 2008.

Manufacturing Shrinks

A gauge of manufacturing in the 17-nation euro area was 47.9 in February, London-based Markit Economics said, below the level of 50 that shows contraction. Unemployment in the region climbed to 11.9 percent in January, the highest since the data series started in 1995, the European Union statistics office said.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against currencies of six U.S. trading partners, gained 0.4 percent to 82.252 after rising to 82.275, the highest since Aug. 21.

The pound fell to the lowest level since July 2010 against the dollar as Markit Economics said its manufacturing gauge based on a survey of purchasing managers slid to 47.9, missing analyst estimates for a reading of 51.

“The data was supposed to be good and it came out negative so that has taken the rug out from under sterling’s feet,” said Jane Foley, a senior foreign-exchange strategist at Rabobank International in London. “There is an array of negative fundamentals for the U.K., so it’s very difficult to see silver linings. I think sterling will be weak all year.”

The pound slid 0.9 percent to $1.5021 after dropping to $1.5013, the lowest level since July 2010. Sterling weakened 0.7 percent to 86.67 pence per euro.

Haven Safety

Investors may seek the safety of haven currencies such as the dollar and yen as U.S. spending cuts, known as sequestration, take effect, said Jim Vrondas, the Sydney-based chief currency and payment strategist at international money transfer service OzForex Ltd.

The sequestration issue “combined with what’s going on in Europe, will certainly make the market shy away from risk trades for the time being,” he said.

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The euro fell below $1.30 for the first time in two months after reports showed manufacturing contracted in February and unemployment climbed to a record.
Friday, 01 March 2013 08:52 AM
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