Euro Remains Lower Before Region’s PMI Data; Kiwi Gains

The euro dropped the most in two months against the dollar as an index of services and manufacturing in the region shrank to a three-year low.
The 17-nation currency declined for a third day versus the yen as the data added to evidence the debt crisis is sapping growth in the euro area. The yen and the dollar strengthened against most of their major counterparts after separate reports showed China’s manufacturing and Japanese exports declined, spurring demand for safer assets. Australia’s dollar and South Africa’s rand led losses among high-yielding currencies.
“One of the big problems that remains unresolved in the euro area is a lack of growth,” said Lee Hardman, a foreign- exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “We still anticipate the euro will continue to weaken and expect a move back to $1.20 over the next six to 12 months.”
The euro dropped 0.5 percent to $1.2978 at 9:48 a.m. in London after falling as much as 0.8 percent, the biggest decline since July 20. The shared currency weakened 0.8 percent to 101.50 yen after sliding as much as 1.2 percent. The yen strengthened 0.2 percent to 78.23 per dollar.
A composite index based on a survey of purchasing managers in both industries in the euro area dropped to 45.9 for September, the lowest since June 2009, London-based Markit Economics said in an initial estimate. A reading below 50 indicates contraction.

‘Get Worse’

“At these levels, euro is a sell” because of the state of the European economy, said Joseph Capurso, a strategist at Commonwealth Bank of Australia (CBA) in Sydney. “The economy is going to get worse before it gets better in Europe.”
The euro has slumped 4.4 percent in the past year, the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 1.1 percent and the yen weakened 3.1 percent.
The Dollar Index advanced for the third time in four days after the data from China and Japan added to evidence that Asian economies are slowing.
A preliminary reading was 47.8 for a China purchasing managers’ index released today by HSBC Holdings Plc and Markit Economics, compared with a final level of 47.6 last month. Japan’s overseas shipments slid 5.8 percent on weakness in demand from Europe and China.
The Dollar Index (DXY), which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, rose 0.5 percent to 79.432.
Australia’s currency fell as the Chinese data clouded the prospects for the South Pacific nation’s resource exports.
“The market was probably expecting a bit more of a bounce” in the Chinese data, said Emma Lawson, a currency strategist at National Australia Bank Ltd. in Sydney. “The Aussie is a little bit lower. There’s just a little bit of disappointment there.”
The so-called Aussie dropped 0.8 percent to $1.03983. South Africa’s rand declined 0.7 percent to 8.3286 per dollar.

Source: Bloomberg