* Euro under pressure near 8-month low vs dollar
* Upbeat U.S. employment data supports dollar vs yen
* Japan CPI as expected, muted reaction from dollar/yen
(Updates after German data, adds new comments, prices)
By Patrick Graham
LONDON, July 25 The euro struggled to hold above
eight-month lows against the dollar on Friday, hurt by a dive in
Germany's Ifo survey of business sentiment heading in to the end
of the U.S. currency's strongest week since March.
The Ifo numbers, the most watched forward-looking indicator
of growth in the euro zone's largest member economy, fell for
the third month running, both of its main indexes falling much
more than forecast.
The euro fell to as low as $1.3444 in response, within
touching distance of Thursday's eight-month lows around $1.3438.
"Traders were net short on EUR/USD before the data and this
reading has pushed the euro further lower," said Naeem Aslam,
chief market analyst at AvaTrade.
Leading banks have been forecasting a decisive break higher
by the dollar against the euro since early this year but have
been frustrated by lukewarm U.S. data and yield-seeking
investment flows into European stocks and bonds.
But U.S. economic numbers have finally shown some more
consistency in the past couple of months and the slightest hints
of a more hawkish tone from Federal Reserve chief Janet Yellen
have proven triggers for a jerk higher in the currency.
A number of analysts say that may be the start of something
bigger, although there is still caution out there.
"Really, one could feel sentiment among the dealers turn
against the euro sometime in May and my feeling is that may
finally now be coming through," said Jane Foley, a strategist
with Rabobank in London.
"I did have $1.35 for the end of this year, and obviously we
have broken through that now. If it is still there in two weeks
then I will think about revising that down a little."
The essence of the argument against the euro is a poorer
economic outlook that many argue will force the European Central
Bank to take more steps - potentially the outright
money-printing resisted so strongly to date by German
The prospect of an exchange of growth-sapping sanctions with
Russia after the downing of a Malaysian airliner in Ukraine last
week were also among the factors in the low reading of Ifo and
have weighed on the euro more broadly.
The dollar was little changed at 101.76 yen after
gaining more than 0.3 percent overnight to a two-week high of
101.86 after weekly U.S. filings for first-time jobless benefits
fell to the lowest level since early 2006.
The greenback, which has been closely tracking U.S. debt
yields, was also helped by a rise in yields after the strong
employment indicator. It was poised to gain about 0.4 percent on
the week against the Japanese currency but lacked the momentum
to test the 102.00 threshold.
Market players said selling of yen crosses was a factor
capping further advances by the dollar.
"Selling of sterling, Australian dollar and New Zealand
dollar against the yen is helping prevent a further rise in
dollar/yen. Profit-taking in such yen crosses is a key driver,
rather than trades in dollar/yen itself," said Bart Wakabayashi,
head of currencies at State Street in Tokyo.
British economic growth data had also been keenly awaited
but a quarterly expansion bang in line with forecast at 0.8
percent left sterling little moved.
The pound fell back below $1.70 for the first time in a
month this week, but unlike the euro it has been able to rely on
strong support from an improving economy throughout that period.
It traded just 0.1 percent lower on the day at $1.6973, down
0.7 percent since last Friday.
(Editing by Jeremy Gaunt.)