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FOREX-Euro's gains fizzle out on German PMI data, dollar steady
March 24, 2014 / 9:32 AM / 4 years ago

FOREX-Euro's gains fizzle out on German PMI data, dollar steady

* Euro fails to latch on to gains made on French PMI data
    * Dollar buyers await more evidence of U.S. recovery
    * Yuan recovery helps Aussie

    By Anirban Nag
    LONDON, March 24 (Reuters) - The euro struggled to extend
gains on Monday, hurt by evidence that growth in the euro zone's
largest economy, Germany, was slowing, though investors were
also wary of buying the dollar as they awaited more evidence of
a U.S. recovery.
    The euro earlier jumped to a European session high after
surveys showed French business activity grew in March at the
fastest pace in more than 2-1/2 years, beating forecasts for a
further contraction in the bloc's number two economy. 
    The currency quickly gave up those gains after data showed
the German private sector slowed in March, disappointing some
investors who were positioned for a better reading. 
    The euro jumped to $1.3827 from around $1.3798 before
the French data was released, pulling further away from a recent
two-week trough of $1.3749. It fell back to $1.3790 after the
German data, which left it flat on the day. 
    "It was a very mixed bag with France beating expectations
(and)... Germany coming in below forecasts," said Alvin Tan,
currency strategist at Societe Generale.
    "It doesn't look like that the ECB will do anything. So the
next leg in the euro/dollar pair has to come from the dollar's
side. And for that we need U.S. data to outperform and investors
to price in expectations of Fed rate hikes."
    Partly supporting the euro has been the perception that the
European Central Bank is reluctant to ease monetary policy any
further. The euro's resilience prompted the president of the
European Council, Herman Van Rompuy, to complain on Friday that
the currency was too strong for euro zone exporters.
    The dollar index was up 0.1 percent at 80.184, not
far from a three-week peak of 80.354 set on Thursday.
    Investors snapped up the dollar last week as they hiked
their bets on a possible U.S. interest rate hike early in 2015
after new Fed Chair Janet Yellen surprised markets by raising
the prospect of such a move.
    Traders said further gains for the dollar now depended on
the strength of coming data, with any acceleration in the U.S.
economic recovery likely to bolster expectations of an earlier
normalisation of Fed policy.
    "Money tends to flow to currencies with higher rates. The
dollar is struggling to extend gains probably because many
people had already had a big dollar long position," said Bart
Wakabayashi, head of forex at State Street Global Markets in
    The dollar was up 0.3 percent against the yen at
102.59 yen. Dollar buyers were eyeing the March 19 high of
102.69 yen.
    A recovery in the Chinese yuan helped the Australian dollar
recover from lows. The Aussie, which is used as a more liquid
proxy by investors and speculators to express their views about
China, had dipped after a survey showed activity in Chinese
factories contracted again in March.
    China's flash Markit/HSBC Purchasing Managers' Index (PMI)
fell to an eight-month low of 48.1 in March from February's
final reading of 48.5. 
    The Aussie dropped to $0.9048 on the March number,
but it kept clear of last week's low of $0.8990 and later
drifted back up to $0.9105. 
    Last week, the yuan suffered its biggest weekly drop against
the dollar to hit 13-month lows, although there were signs the
currency may be finding a base.
    The yuan posted its biggest intraday rise against the dollar
on Monday since March 2012, boosted by speculation the Chinese
government would unveil stimulus measures to support the

 (additional reporting by Hideyuki Sano; Editing by John

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