* Market dumps euro as recession deepens
* Euro wallows at three-week lows vs USD
* Kiwi jumps on retail sales data; G20 next in focus
By Ian Chua
SYDNEY, Feb 15 The euro nursed heavy losses on
Friday in the wake of data showing the euro zone slipped deeper
into recession late last year, while markets braced for more
conflicting comments on currencies as G20 officials meet in
Traders said the disappointing data could add pressure on
the European Central Bank to ease further and gave investors an
excuse to take profits in a currency that had gained as much as
4 percent on the dollar this year.
In contrast, a surprisingly strong New Zealand retail sales
report saw investors snap up the kiwi dollar, driving it half a
U.S. cent higher to a 17-month peak of $0.8519.
The euro plumbed a one-month low on the kiwi at NZ$1.5647
. Against the greenback, it was at $1.3355,
having hit a three-week low of $1.3315. The euro was now well
off a 13-month high of $1.3711 set early this month.
Immediate support for euro/dollar is seen around $1.3310, a
level representing the 38.2 percent retracement of its Nov-Feb
Against the yen, the euro slid to 124.25, down
from a 34-month high of 127.71 set a week earlier.
Economic output in the 17-country region fell 0.6 percent in
the fourth quarter, the steepest since the first quarter of 2009
and more severe than the median forecast of a 0.4 percent drop
in a Reuters poll.
"As the fundamental outlook for the region deteriorates, the
European Commission appears to be scaling back its push for
austerity...," said David Song, currency analyst at DailyFX.
"In turn, the European Central Bank may have little choice
but to carry out its easing cycle throughout 2013, and the
Governing Council remains poised to push the benchmark interest
rate to a fresh record-low as the economic downturn threatens
Traders said a comment from European Central Bank Vice
President Vitor Constancio about negative deposit rates in the
euro zone being a possibility, also weighed on the single
The pullback in the euro saw the dollar index briefly
hit a one-month high of 80.621, bringing into focus this year's
peak of 80.868 set on Jan. 4.
The greenback, however, lost a bit of ground against the
yen. It was last at 92.84, a day after the Bank of Japan
kept monetary policy steady and revised up its assessment of the
economy. Still, it was near a 33-month high around 94.47 set on
Investors remained wary on the yen with the BOJ under
intense political pressure to reflate the economy.
BOJ Governor Masaaki Shirakawa on Thursday defended the
central bank's aggressive monetary expansion, saying it was
aimed at reviving the economy not at weakening the yen.
His comments came as finance officials from the G20 gather
in Moscow and are sure to generate mixed messages about how to
address policies of Japan's new government which have driven the
"The prevailing sense from all of the official commentary on
currencies this week is that the international community is
willing to tolerate a weaker yen so long as Japan continues to
focus on domestic policies and probably moderates its rhetoric
on the currency," says JPMorgan in a note.
Another standout currency was sterling. It wallowed at 6-1/2
month lows on the greenback near $1.5475 as investors
continued to shun the currency after the Bank of England this
week forecast higher inflation and weak growth.
The Norwegian crown was a big mover, falling
sharply after the head of the country's central bank said he was
in no hurry to raise rates and might even cut them if the
currency got too strong.