FOREX-Euro slips but dollar weakness to limit fall

Tue Apr 30, 2013 4:11am EDT

Related Topics

* Euro dips, but dollar's struggles lend some support

* Dollar index hovers near lowest in nearly two weeks

* Recent weakness of U.S. data weighs on dollar

By Anirban Nag

LONDON, April 30 (Reuters) - The euro fell on Tuesday, hurt by slowing consumer demand in Germany, although losses are likely to be limited by expectations the Federal Reserve's ultra-loose policy will be maintained and weigh on the dollar.

German retail sales fell for the second month running in March, confounding forecasts of a rise.

Coming a day after April inflation in the euro zone's largest economy hit its lowest in more than two years, the numbers bolstered expectations of a rate cut by the European Central Bank on Thursday.

The euro was down 0.2 percent at $1.3070 with traders citing offers layered above $1.3110 and $1.3150 and chart resistance at its 100-day moving average of $1.3158. Near-term support was at its 55-day moving average of $1.3044.

"The data is one factor why some investors are hoping for a slightly more pro-active stance from the ECB," said Jeremy Stretch, currency strategist at CIBC World Markets.

"If the ECB were to resort to a refinancing rate cut on Thursday and announce non-standard measures to boost credit flow, we could see a bounce in the euro. But anything above $1.32 is a sell."

He added that dollar weakness was checking a sharper fall in the euro.

A slide in the two-year Treasury yield to a nine-month low of 0.21 percent weighed on the U.S. currency.

The dollar index, which measures its value against a basket of six major currencies, last traded at 82.212. It hit a low of 82.035 hit on Monday, its lowest since April 17.

The Fed kicks off its two-day policy meeting on Tuesday and investors are watching to see if a sluggish recovery and slowing inflation could not only end talk of tapering its bond-buying but push the central bank into buying more assets.

"The loss of cyclical momentum for the U.S. economy heading into the second quarter and low inflation pressures are resulting in the dollar giving back some of its gains," Lee Hardman, currency analyst at Bank of Tokyo Mitsubishi, wrote in a note.

The dollar was flat at 97.80 yen, having slipped to 97.35 yen on Monday, its lowest level in almost two weeks.

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