(Updates with New York prices, adds comment, background,
changes dateline previous LONDON)
* Euro at nine-month low vs dollar
* Dollar index hits 11-month peak
* Sterling hit by weak industrial data
* NATO says concerned about threat of Russia entering
By Daniel Bases
NEW YORK, Aug 6 The euro hit a fresh nine-month
low against the dollar on Wednesday after Italy said it fell
into recession again in the second quarter, June German
industrial performance slumped and investors grew more cautious
over the conflict in Ukraine.
The dollar reached an 11-month high of 81.716 against
a basket of major currencies, boosted by a move by investors
away from currencies seen as higher-risk, amid reports Russian
troops had gathered on the Ukrainian border.
Around 20,000 Russian troops massed on Ukraine's eastern
frontier were creating a "dangerous situation", NATO said on
Wednesday. It warned that Moscow could use humanitarian concerns
as a pretext to send troops across the border.
That, as well as the data showing Italy's economy
unexpectedly shrank in the second quarter, drove the euro as low
as $1.3331, its lowest since early November.
"It's difficult for some investors to be short Russia,
because of liquidity reasons, which effectively encourages proxy
selling of euros as concerns grow about a further escalation of
those tensions between the West and Russia," said Valentin
Marinov, head of European G10 currency strategy at Citigroup.
"All of this is adding to the headwinds of an already weak
recovery in the euro zone, encouraging bets on more aggressive
European Central Bank easing, weighing on the euro."
German industrial orders fell at their steepest rate in
almost three years in June. One reason seemed to be companies
becoming more cautious about taking on contracts as geopolitical
tension escalated. Another was weaker euro zone
The European Central Bank will hold its next rate policy
meeting on Thursday.
Tied into the euro's weakness in recent weeks has also been
the drop in equities prices globally, but for European funds in
particular. According to Lipper, a Thomson Reuters service,
U.S.-domiciled equity funds investing in Europe have had a
string of seven straight weeks of net outflows.
"Since June of last year we have seen U.S. money investing
into the euro zone and as markets start to take profit and are
heavily skewed in terms of positioning the outcome is pressure
on European assets and downward pressure on the euro against the
dollar," said Sebastian Galy, senior currency strategist at
Another positive for the dollar was a bigger-than-expected
narrowing of the June U.S. trade deficit as petroleum imports
fell to a 3-1/2 year low.
Sterling slipped after the UK reported that industrial and
manufacturing output grew less than expected in June, cooling
expectations the Bank of England will raise interest rates this
The pound fell to a session low of $1.6819 before recovering
to $1.6836, down 0.30 percent.
A two-day meeting of the BoE's rate-setting Monetary Policy
Committee begins on Wednesday, but investors won't know until
later in August to see if any members advocated a rise in rates.
The dollar slid 0.22 percent to 102.37 yen, holding
above its 200-day moving average. The euro held near a two-week
low of 136.40 yen.
(Additional reporting by Jemima Kelly in London, Masayuki
Kitano in Singapore and Ian Chua in Sydney; Editing by Larry
King and Meredith Mazzilli)