* Better-than-expected German PMI survey helps euro
* Minutes showed Fed debated raising rates earlier
* China flash PMI hits 3-month low, Aussie slips
(Recasts after euro zone data, details, quotes)
By Anirban Nag
LONDON, Aug 21 The euro recovered from a
11-month low against the dollar, helped by better-than-expected
German private sector growth data, although gains were likely to
be temporary given expectations of more monetary stimulus.
The U.S. dollar, buoyed by rising Treasury yields and
widening interest rate differentials in its favour, traded below
11-month peaks against a basket of major currencies, having
scaled those highs after minutes of the Federal Reserve's July
meeting, released on Wednesday, sounded slightly hawkish.
The Australian dollar extended its losses after a
preliminary survey of China's manufacturing sector showed growth
slowing to a three-month low.
In the euro zone, Germany's private sector grew for a 16th
month running in August, suggesting Europe's largest economy
could expand robustly in the third quarter after it surprisingly
contracted in the second.
Data from France showed business activity was stagnant in
August, although service sector growth picked up.
While the composite euro zone survey showed activity slowing
in August, it offered some relief to the single currency, as
some had feared a far worse reading.
The euro rose 0.1 percent to $1.3278 after the German
survey, having hit an 11-month low of $1.3242 in Asian trade.
The single currency has shed 1.2 percent in the past week as
the dollar rebounded on better-than-expected data. Falling
German Bund yields, lower money market rates, and a narrowing
euro zone current account surplus helped push the euro lower.
"The German data was better than expected, but it is clear
that economic momentum is declining from a month earlier. While
the euro can bounce a bit, the upside is rather limited from
here," said Yujiro Goto, currency analyst at Nomura.
"The euro should be on a gradual declining path."
The euro's bounce saw the dollar index slip to 82.20,
having earlier hit 82.364, its highest since September. It broke
out of the 81.188/81.716 range that held for much of this month.
The Fed minutes showed policymakers debated whether interest
rates should be raised earlier given a surprisingly strong jobs
market recovery. Most officials, however, wanted further
evidence before changing their view.
In any case, U.S. Treasury yields rose. Two-year
yields hit a two-week high just shy of 0.5 percent.
That underpinned the dollar, which touched its highest in
over four months at 103.965, not far from the April peak
of 104.13. A break there could see the market aim for the 2014
high of 105.45 set in January.
"The momentum is there. The market is experiencing a bit
of...euphoria, putting logic aside and now aiming for 104 yen. I
hesitate to use the term but it's 'risk-on'," said Masashi
Murata, senior currency strategist at Brown Brothers Harriman in
The soft China PMI survey put a further dent in the
Australian dollar, which is sensitive to data from China, its
main export market. The Aussie fell to $0.9235. It was
last at $0.9260, down 0.2 percent on the day.
(additional reporting by Shinichi Saoshiro, editing by Nigel