* Euro gets a relief from sell off after PMI surveys
* Gains seen temporary as worries over Russian sanctions
* NZ dollar falls sharply after RBNZ sounds less hawkish
(Adds details, quotes)
By Anirban Nag
LONDON, July 24 The euro climbed from an
eight-month low on Thursday after German and French business
activity beat expectations, although fears that possible tougher
sanctions on Russia would hurt the euro zone were seen limiting
The French composite purchasing managers index of both the
manufacturing and services sector rose to 49.4 from 48.1 in
June, bringing activity closer to the 50-point line dividing
growth from contraction.
German business activity also expanded in July as the
services sector grew at the fastest rate in three years. But
concerns that economic activity in Germany, which has strong
trade links with Russia, could stumble in coming months as
sanctions begin to bite were keeping many away from the euro.
The sanctions are likely to weigh on a fragile recovery and
keep alive expectations of looser monetary policy from the
European Central Bank. Euro zone interest rates were slashed in
June and the ECB has left open the possibility of further
monetary loosening - possibly through quantitative easing.
The euro hit a day's high of $1.3476 after the German data
was released from $1.3450 beforehand. It had fallen to an
eight-month low of $1.3438 in early London trade. The euro was
also slightly higher against the yen at 136.62 yen
and rose against the pound to 79.075 pence, having slumped to a
23-month low on Wednesday.
"The activity data offsets some of the weakness we saw last
month and that has helped the euro," said Geoff Yu, currency
strategist at UBS. "But there are concerns about domestic growth
in the euro zone and possible sanctions on Russia are likely to
have an impact."
The euro has also struggled to find support amid
persistent expectations for further monetary easing in the euro
zone and a gradual widening of interest rates favouring the U.S.
The biggest mover though was the New Zealand dollar
. It skidded to a six-week low after the country's
central bank switched to a wait-and-see stance following its
fourth straight rate hike and Governor Graeme Wheeler warned
against a strong currency.
The kiwi fell 1.3 percent to $0.8568, a level not
seen since June 12.
The Reserve Bank of New Zealand (RBNZ) raised its cash rate
by 25 basis points to 3.5 percent early on Thursday but pushed
the pause button, saying the economy appeared to be responding
to higher rates as intended.
The move was not a complete surprise given many have been
questioning the need for more tightening in the face of a high
currency, restrained inflation and falling prices for dairy, the
country's biggest export earner.
Yet the reaction in the kiwi was swift with investors
knocking the currency down sharply.
"Perhaps the main surprise was the language regarding the
high exchange rate. 'There is potential for a significant fall'
opens to interpretation as a veiled intervention threat," said
Imre Speizer, senior strategist at Westpac in Auckland.
Analysts at Citi said it is unusual for a central banker to
make such blunt comments about the currency and showed a high
level of frustration with the strong kiwi.
(Additional reporting by Shinichi Saoshiro; Editing by