* Euro falls on lackluster German PMI data
* Worries about Cyprus also weigh on euro
* BoJ Kuroda offers no clues on an emergency meeting
By Gertrude Chavez-Dreyfuss
NEW YORK, March 21 The euro fell against most
currencies on Thursday after surveys showed a struggling euro
zone economy, with softer-than-expected German business activity
data casting doubts about a recovery in Europe's largest
Worries about a banking collapse and uncertainty in Cyprus
also loomed. But even before Cyprus erupted, the latest evidence
showed euro zone economy in the midst of a deep slowdown and
little signs of a recovery likely to keep demand for the euro
"Euro/dollar has been trading within a narrow range and is
holding up pretty well and I think this has something to do with
peripheral bond yields in Spain and Italy which have been
well-capped. This goes to show that there has been limited
contagion from Cyprus," said Vassili Serebriakov, currency
strategist, at BNP Paribas in New York.
"What we do see is interest in selling the euro on the
crosses after the weak euro zone data, so euro/Aussie and
euro/Canada are getting hit."
The euro dropped to a session low of $1.2879, nearing
the four-month low of $1.2843 hit on Tuesday, and was last at
$1.2904, down 0.2 percent on the day. It also hit a five-week
low against the British pound and at one point shed
more than 1 percent against the yen.
The euro was last at 85.21 pence, down 0.5 percent, while it
last traded at 122.76 yen, down 1.1 percent. The single euro
zone currency also dropped 0.7 percent against the Australian
dollar at A$1.2374, falling 0.4 percent to C$1.3210
versus the Canadian currency.
Business surveys on Thursday showed that the euro zone's
economic downturn deepened in March, contrary to expectations of
a modest improvement, with most investors worried about slowing
growth in Germany.
Germany's composite PMI fell in March, although it held
above the 50 line that separates growth from contraction. But in
France, the bloc's second-biggest economy, it sank to a
"Today's data adds to the argument that loose policy will be
needed to stay in place," said Chris Walker, currency strategist
at Barclays. "We expect the euro to head lower."
Analysts said near term support lay around the 200-day
moving average for the euro against the dollar around $1.28775
with most investors looking to sell into any bounce toward the
The most immediate fears of financial meltdown in Cyprus
have eased for now, but the small island state is still
scrambling to secure financial aid. It extended a bank lockdown
to next week to prevent a run on banks and has turned to Russia
for a lifeline.
The European Central Bank also gave Cyprus until Monday to
raise 5.8 billion euros to clinch a bailout deal or face losing
emergency funds for its banks and inevitable collapse.
FOCUS ON KURODA
The yen fell briefly after the new Bank of Japan governor
Haruhiko Kuroda vowed to take all possible measures available to
achieve its 2 percent inflation goal in about two years.
Still, the yen recovered and was up on the day, with the
dollar down 0.9 percent to 95.16 yen. Asian central banks
were said to be looking to buy the dollar on dips.
Kuroda also said that the BoJ does not have to rely on
currency moves to escape deflation and offered little insight on
whether he will call for an early policy board meeting ahead of
the bank's next scheduled meeting on April 3-4.
BNP's Serebriakov said Kuroda's comments were less dovish
than markets had anticipated. "The market has a very high bar
for dovishness from the BoJ, so when he said that the bank does
not need to rely on a weak yen to beat deflation, that kind of
was a letdown."
Market expectations for aggressive monetary easing by the
BOJ remained intact however, traders said. That would keep the
dollar near a peak of 96.71 yen last week, the greenback's
strongest level versus the Japanese currency since August 2009.
The dollar's rise have been partly due to improved data from
the United States, though on Wednesday the Federal Reserve
reiterated its ultra-loose policy bias.
The Fed will continue to buy $85 billion in mortgage and
Treasury bonds per month and Fed Chairman Ben Bernanke said the
central bank would only slow the pace of its bond buying after
the labor market shows sustained improvement.