* Euro zone PMI data comes in below forecasts
* Strong U.S. economic data supports dollar
* Dollar turns positive against yen, franc
By Sam Forgione
NEW YORK, Feb 20 The dollar gained against the
euro for a second straight day on Thursday after euro zone
business surveys pointed to a sluggish recovery and a fragile
outlook for the region, while the greenback also drew support
from strong U.S. economic data.
Markit's Composite Purchasing Managers' Index for the euro
zone, which is based on surveys of thousands of companies,
dipped to 52.7, just below January's 31-month high of 52.9. The
reading missed forecasts for a rise to 53.1.
The euro fell as low as $1.3685, pulling away further
from a seven-week high of $1.37735 struck on Wednesday, and down
0.11 percent on the day.
The euro was also down against the Japanese yen, falling
about 0.1 percent to 140.40 yen, and was down slightly against
the Swiss franc. Europe's common currency was flat against the
Adding to the euro's problems was a much
softer-than-expected reading of French inflation, which kept
alive risks of deflation in the euro zone.
The French PMI data came in well below forecasts
while German figures that did little to counter worries that the
euro zone economy will need more stimulus from the European
"The recovery is far from certain in Europe," said Clem
Miller, investment strategist at Wilmington Trust Investment
Advisors in Baltimore.
Highlighting some of the choppiness that the euro could face
in the near term, one-month euro/dollar implied volatility - a
gauge of how sharp swings will be - edged up to 6.4 percent,
climbing from a six-year low struck earlier this week.
Strong U.S. economic data released Thursday supported the
dollar's gains versus the euro.
The Labor Department reported that initial claims for
unemployment benefits declined by 3,000 last week to a
seasonally adjusted 336,000. The decline pointed to steadily
improving labor market conditions despite two straight months of
In a separate report, the Labor Department said strong gains
in the price of household energy had accounted for most of a 0.1
percent rise in the Consumer Price Index in January.
U.S. manufacturing activity, meanwhile, accelerated in
February at its fastest pace in nearly four years due in part to
growth in new orders, financial data firm Markit said.
"The U.S. economic data this morning definitely benefited
the dollar across the board," said Blake Jespersen, managing
director of foreign exchange at BMO Capital Markets in Toronto.
The dollar took in stride data on Thursday from the
Philadelphia Federal Reserve Bank showing factory activity in
the U.S. mid-Atlantic region unexpectedly contracted in
DOLLAR GAINS AGAINST YEN, FRANC
The euro's drop helped the dollar recover against a basket
of currencies. The dollar index was trading 0.17 percent higher
on the day at 80.277.
The dollar was also slightly higher against the yen
at 102.340 and on pace to post its best weekly performance since
"There's an increasing realization that the Japanese economy
is weaker than everyone expected," said Miller of Wilmington
Japan suffered a record trade deficit in January as growth
in exports spurred by a weak yen was outstripped by a surge in
import costs, recent data showed.
The dollar was also up 0.1 percent on the day against the
Swiss franc to trade at 0.8894.