* Common currency stays near two-year high versus weak
* Euro pares gains after below-forecast euro zone PMI data
* Euro outlook still bright due to bearish dollar sentiment
* Dollar weak on expected Fed taper delay, lower U.S. yields
By Gertrude Chavez-Dreyfuss
NEW YORK, Oct 24 The euro rose to a fresh
two-year peak against the dollar on Thursday as concerns about
the outlook for the U.S. economy and monetary policy outweighed
weaker euro zone data.
The dollar remained under pressure due to lower U.S. bond
yields and expectations the Federal Reserve will maintain its
bond-buying stimulus program well into next year.
"The dollar is kind of drifting lower because of the delay
in the Fed tapering, but it kind of feels like there is no
direction at the moment," said Vassili Serebriakov, currency
strategist at BNP Paribas in New York.
"There is no real big consensus trade anywhere. Until two
days ago, people liked risk, but now some of those risk trades
are being sold off."
In midday trading, the euro was up 0.2 percent at
$1.3802, having hit $1.3824, its strongest since November 2011.
It came off its highs after purchasing managers' surveys for
the euro zone showed the pace of growth in business activity
eased unexpectedly this month, suggesting the region's recovery
may be less solid than previously thought.
Analysts and traders said that as a result, the euro may
struggle to make a sustained break above $1.38.
"While the PMI numbers were far from generating
champagne-popping excitement, they do corroborate the bumpy path
to recovery in the EU, and the lengthy time it will take to make
any meaningful headway," said Scott Smith, senior corporate FX
trader at Cambridge Mercantile Group in Calgary, Canada.
Jane Foley, senior currency strategist at Rabobank in
London, said Thursday's peak of $1.3824 could act as stiff chart
resistance for the euro for now.
"The disappointing tone of the euro zone data will suggest
that the euro is looking toppy up here, and this should keep
euro/dollar in check," said Foley.
In the United States, jobless claims fell less than expected
in the latest week to a seasonally adjusted 350,000. The data,
however, did not reflect the true picture because California
continued to process a backlog of applications caused by
The dollar fell broadly, hitting a near nine-month low
against a basket of currencies of 79.081. It was last
flat on the day at 79.233.
Weak U.S. jobs data for September released on Tuesday
suggested the U.S. recovery was not yet on a firm footing, while
a drop in the 10-year U.S. Treasury yield on
Wednesday to a three-month low further dented the dollar's
The dollar was little changed against the yen to 97.43 yen
but held above Wednesday's two-week low of 97.15 yen.
The Australian dollar was down 0.3 percent at
US$0.9591, paring gains after an earlier boost from data showing
Chinese manufacturing hit a seven-month high in October.
"The (Chinese manufacturing) data helped temper worries that
China might tighten credit, or allow interest rates to rise, to
help ward off inflation risks," said Joe Manimbo, senior market
analyst at Western Union Business Solutions in Washington.
Analysts said concerns remained about rising money market
rates in China, which may weigh on the Australian currency.
China's benchmark seven-day repo rate rose nearly a percentage
point on Thursday after China's central bank let cash flow out
of the money market for a second week.
"Those underlying concerns kept currencies with close ties
to China, like the Aussie and loonie (Canadian dollar), from
participating in the broader risk rally," Manimbo said.
The New Zealand dollar was also lower on the day, down 0.7
percent at US$0.8325, while the Canadian dollar slid as
the greenback rose 0.4 percent to C$1.0426.