* Euro falls on lacklustre German PMI data
* Worries about Cyprus mute demand for euros
* Investors focus on Kuroda news conference
By Nia Williams
LONDON, March 21 The euro fell against the
dollar on Thursday, after weaker-than-expected German business
activity data fanned concerns about the health of the euro
zone's largest economy.
Worries about a banking collapse in Cyprus also loomed over
investors and dampened demand for the euro after the country
rejected the terms of a European Union bailout earlier this
The euro dropped 0.3 percent on the day to $1.28895,
nearing the four-month low of $1.28435 hit on Tuesday.
Germany's private sector slowed down in March, with
manufacturing activity dropping below the 50 level that
separates expansion from contraction.
But some strategists said the euro's losses may be limited
by the lack of appetite among investors to buy other major
currencies, given expectations of further monetary easing by the
U.S. Federal Reserve and Bank of Japan.
"There's no clear bullish story out there to jump on to buy
against the euro. But if the bad news flow continues and we get
no resolution in Cyprus the preference would be to sell any
rallies rather than buy the dips," said Daragh Maher, currency
strategist at HSBC.
Maher said the 200-day moving average around $1.28775 would
be a popular support level and sellers were likely to emerge
The most immediate fears of financial meltdown in Cyprus
have eased for now, but the small island state is still
scrambling to secure financial aid. It extended a bank lockdown
to next week to prevent a run on banks and has turned to Russia
for a lifeline.
Investors will keep a close watch on yields at a Spanish
bond auction later in the session for any sign that contagion
from Cyprus is spreading to the euro zone's heavily indebted
The euro's losses on weak German economic data helped push
the dollar index up 0.3 percent to 83.010, closer to a
seven-month high of 83.166 hit last week.
This was despite the U.S. Federal Reserve on Wednesday
pressing forward with its aggressive policy stimulus.
The Fed will continue to buy $85 billion in mortgage and
Treasury bonds per month and Fed Chairman Ben Bernanke said the
central bank would only slow the pace of its bond buying after
the labour market shows sustained improvement.
FOCUS ON KURODA
Market players were also awaiting a news conference from new
Bank of Japan governor Haruhiko Kuroda and deputy governors
Kikuo Iwata and Hiroshi Nakaso for clues on how aggressively the
central bank will ease policy under its new leadership.
The euro fell 0.6 percent against the Japanese currency to
123.33 yen, while the dollar also dipped 0.3 percent
to 95.73 yen.
The yen strengthened as some investors speculated the market
could be disappointed by Kuroda's news conference, given how far
expectations of aggressive monetary easing have come.
"I'm sceptical that anything new can come of it. He (Kuroda)
is part of a board, and it's going to be a little difficult for
him to go up there before the board has met, and promise to do
anything," said Rob Ryan, strategist for RBS in Singapore.
Still, if Kuroda calls an early policy board meeting ahead
of the BOJ's next scheduled meeting on April 3-4, the yen could
come under pressure as market players would take such a move as
a powerful signal of intent from the central bank, Ryan said.
Market expectations for aggressive monetary easing by the
BOJ have been running high, helping lift the dollar to a peak of
96.71 yen last week, the greenback's strongest level versus the
Japanese currency since August 2009.