(Correcting fourth paragraph to "rate cut" instead of "rate
* Weak German PMI fans ECB rate cut speculation
* Slower Chinese manufacturing growth helps yen recover
* Aussie falls to 6-week low vs U.S. dollar
By Gertrude Chavez-Dreyfuss
NEW YORK, April 23 The euro dropped to a
two-week low against the dollar on Tuesday after weak German
data raised concerns about the health of the euro zone economy,
reviving speculation that the European Central Bank could cut
A survey showed Germany's private sector shrank for the
first time in five months in April, overshadowing improvements
in French data. The soft German data added to worries about the
global economic outlook after earlier figures showed Chinese
manufacturing growth slowed in April.
These reports also helped the yen to move higher and drove
the commodity-linked Australian dollar to a six-week low against
the U.S. dollar.
"Given the deteriorating fundamentals in the euro zone, the
prospect of (an ECB rate cut) has certainly increased," said
Boris Schlossberg, managing director of FX strategy, at BK Asset
Management in New York. "A rate cut would be the quickest and
least expensive policy course."
The euro fell as low as $1.2971 and could break
decisively out of the $1.30 to $1.32 range that has held for the
past couple of weeks. It was last down 0.7 percent on the day at
Comments on Monday from ECB policymakers about falling
inflation and poor growth prospects in the euro zone suggested
the central bank may be leaning toward a cut in its main
refinancing rate, which stands at a record low 0.75 percent.
More losses could push the euro towards chart support at its
200-day moving average around $1.2936 and the early April low of
Ken Dickson, investment director at Standard Life
Investments, in Edinburgh, Scotland, said the single currency
should be significantly lower. Standard has had a short euro
position for some time.
"A rate between $1.10 and $1.20 is reasonable over the next
three or four quarters."
The euro fell 1 percent to 128.36 yen, moving
further away from its April 11 three-year peak around 131.10
The yen, which typically rises as investors seek safety
during times of heightened concern about the global economy,
recovered broadly, with the dollar last down 0.3 percent
at 98.88 yen.
The dollar has faced stiff resistance at the 100 yen level,
having stalled at a four-year high of 99.95 yen earlier this
month, but most analysts and traders still believe it is on
track to scale this peak.
Strategists said the yen could take its cue from the next
batch of Japanese capital flows data due on Thursday. A focal
point for the yen is whether the BoJ's aggressive monetary
easing will prompt Japanese investors to increase their
purchases of higher-yielding overseas assets.
The following day, investors will look to the BOJ's policy
meeting for clarity on how policymakers intend to implement the
"It's probably just a matter of time, but there's no big
catalyst until Thursday's data and BOJ meeting on Friday. We
will go through 100 yen; it's just a question of when," said
Geoff Kendrick, FX strategist at Nomura.
The dip in the Chinese manufacturing data and falls in
commodity prices pushed the Australian dollar down 0.4
percent to a 6-week low of $1.0221. It also lost around 1
percent against the yen
(Additional reporting by Jessica Mortimer in London; Editing by