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FOREX-Euro extends falls on dismal German growth forecast
December 7, 2012 / 9:46 AM / 5 years ago

FOREX-Euro extends falls on dismal German growth forecast

* Euro falls to nine-day low vs dollar
    * Bundesbank cuts 2013 German GDP growth forecast to 0.4 pct
    * Strong earthquake in Japan briefly lifts yen
    * U.S. job data at 1330 GMT next focus for market

    By Anooja Debnath
    LONDON, Dec 7 (Reuters) - The euro fell to a nine-day low
against the dollar on Friday after the Bundesbank slashed its
growth outlook for Germany, with the single currency at risk of
more losses on prospects of a euro zone rate cut.
    The yen briefly rose after a strong earthquake struck
north-east Japan, triggering a one-metre tsunami. A far more
powerful earthquake in March 2011 led to a sharp rise in the yen
on expectations Japanese investors would repatriate funds held
abroad back home. 
    The euro was down 0.3 percent at $1.2927, having hit
a low of $1.2917 as it retreated further from a seven-week peak
of $1.3127 hit on Wednesday.
    Germany's central bank said on Friday it expected Europe's
largest economy to grow just 0.4 percent in 2013, and pointed to
risks of a recession as the euro zone debt crisis takes its
toll. 
    This drove the common currency lower. It had lost around one
percent on Thursday after European Central Bank President Mario
Draghi said policymakers had discussed cutting borrowing costs
and pushing the deposit rate into negative territory.
 
    The deposit rate is the rate the ECB pays for money banks
park at the central bank. A negative rate would decrease the
appeal of holding euros.
    A drop below chart support at the euro's 55-day moving
average at $1.2914 could see it target the Nov. 28 low of
$1.2880.
    Against the yen, the euro was down 0.3 percent at 106.45 yen
, well below a seven-month high of 107.96 yen hit on
Wednesday.
    "The discussion on (negative) interest rates is what started
the slide in the euro in the last 24 hours and the Bundesbank
report has just compounded that," said Neil Mellor, currency
strategist at Bank of New York Mellon.
    
    U.S. EMPLOYMENT DATA
    Traders said further exchange rate moves might be limited in
the run-up to U.S. non-farm payrolls data due at 1330 GMT.
    Analysts polled by Reuters expect a sharp slowdown in
employment growth due to the disruption caused by the hurricane
Sandy. 
    The dollar was last at 82.33 yen after hitting a
session low of 82.175 yen after news of the earthquake in Japan.
    "It is just a knee-jerk reaction and we are just 5-10 pips
from where we are," said Derek Halpenny, European Head of Global
Currency Research at bank of Tokyo Mitsubishi.
    "...It is not likely to be as significant (as the earthquake
of March 2011)."
    The dollar edged away from a 7-1/2 month high of 82.84 yen
hit last month on expectations of more aggressive easing by the
Bank of Japan. 
    Economists expect U.S. non-farm payrolls to have risen only
93,000 last month after October's 171,000, according to a
Reuters survey of economists. 
    Any weakness in the closely-watched report would reinforce
expectations that the Federal Reserve will announce a new round
of Treasury bond purchases to replace its expiring Operation
Twist programme at next week's meeting and could weigh on the
dollar.  
    "Even if the payrolls data is weak, if the dollar's support
below 82 yen is confirmed, then the dollar could test this
year's high above 84 yen next week," said Hiroshi Maeba, head of
FX trading Japan for UBS in Tokyo.

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