* Euro falls on lacklustre German PMI data
* Worries about Cyprus to weigh down on euro
* BoJ Kuroda offers no clues on an emergency meeting
By Anirban Nag
LONDON, March 21 The euro fell on Thursday,
after surveys showed the euro zone economy was struggling with
weaker-than-expected German business activity data casting fresh
doubts about a recovery in Europe's largest economy.
Worries about a banking collapse and uncertainty in Cyprus
also loomed. But even before the situation in Cyprus blew up,
the latest evidence showed euro zone economy in the midst of a
deep slowdown and little signs of a recovery. All of which is
likely to keep demand for the euro sluggish.
The euro dropped to a session low of $1.2879, nearing
the four-month low of $1.28435 hit on Tuesday, before recovering
to $1.2915, still down on the day. It also hit a five-week low
against the British pound and at one point shed more
than 1 percent against the yen.
Business surveys on Thursday showed that the euro zone's
economic downturn deepened in March, contrary to expectations of
a modest improvement, with most investors worried about slowing
growth in Germany.
Germany's composite PMI fell in March, although it held
above the 50 line that separates growth from contraction. But in
France, the bloc's second-biggest economy, it sank to a
"Today's data adds to the argument that loose policy will be
needed to stay in place," said Chris Walker, currency strategist
at Barclays. "We expect the euro to head lower."
Analysts said near term support lay around the 200-day
moving average around $1.28775 with most investors looking to
sell into any bounce towards the $1.30 level.
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.
FOCUS ON KURODA
The yen fell briefly after new Bank of Japan governor
Haruhiko Kuroda vowed to take all possible measures available to
achieve its 2 percent inflation goal in about two years.
"Kuroda's comments are relatively constructive and don't
really disappoint expectations of further aggressive easing by
the Bank of Japan," said George Saravelos, G10 FX strategist at
Deutsche Bank. "Dollar/yen uptrend is very much intact and by
this time next year, we forecast it to rise to 105 yen."
Still, the yen recovered and was up on the day as Kuroda
offered little insight on whether he will call for an early
policy board meeting ahead of the BOJ's next scheduled meeting
on April 3-4.
The dollar was down 0.8 percent to 95.25 yen with
Asian central banks looking to buy the dollar at dips.
Market expectations for aggressive monetary easing by the
BOJ were still intact, traders said. That would keep the dollar
near a peak of 96.71 yen last week, the greenback's strongest
level versus the Japanese currency since August 2009.
The dollar's rise have been partly due to improved data from
the United States, though on Wednesday the Federal Reserve
reiterated its ultra-loose policy bias.
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.