EURO slips against Dollar on poor manufacturing data

Jan 2 08:20 AM US/Eastern Breitbart

The dollar rose against the euro and yen on Friday in thin volume on the first trading day of 2009, as the foreign exchange market absorbed disappointing eurozone manufacturing data, analysts said.


The European single currency sank to 1.3841 dollars in Asian deals. In London trade, it pulled back to 1.3958, which was down from 1.3969 dollars in New York late on Wednesday ahead of Thursday’s New Year holiday.

Against the Japanese unit on Friday, the dollar advanced to 91.22 yen from 90.63 yen on Wednesday.

The market was subdued with many participants away for Christmas and year-end holidays. Tokyo remained shut on Friday.

“Sandwiched between the New Year holiday and the weekend, today looks set to be another session dominated by low liquidity and a general lack of participation,” said Calyon analyst Daragh Maher.

Liquidity should gradually return to the market beginning next week, when traders will be closely watching key US economic data as well as comments from the US Federal Reserve.

Later Friday, meanwhile, key US manufacturing survey data for December was expected to provide further insight into the ailing American economy.

“The euro has lost ground today (Friday) with euro/dollar breaking back below 1.3900,” said Lee Hardman, currency economist at The Bank of Tokyo-Mitsubishi.

“The euro’s decline likely reflects the fact the recent euro rally will likely prove unsustainable given the negative implications renewed euro strength is likely to have on the eurozone economic growth outlook.

“Furthermore, the euro’s rally in December was likely exaggerated to some extent by the lack of liquidity.”

On Friday, a widely watched survey revealed that manufacturing activity in the countries sharing the euro fell to a record low in December.

The eurozone’s purchasing managers’ index (PMI) for the manufacturing sector, compiled by data and research group Markit, slipped to 33.9 points from 35.6 points in November, the lowest level in the survey’s 11-year history.

It was the seventh consecutive monthly fall in manufacturing activity and worse than expected as market participants surveyed by Dow Jones Newswires were expecting no change to the original estimate of 34.5 points.

A reading under 50 represents contraction in manufacturing.

The fresh data will increase the pressure on the European Central Bank to cut interest rates when it meets next Thursday. The ECB’s key rate currently stands at 2.50 percent.

The eurozone, which was boosted to 16 nations with the addition of Slovakia on Thursday, slipped into recession in the third quarter of 2008, with gross domestic product contracting for two consecutive quarters for the first time since the currency bloc was formed in 1999.

Meanwhile the euro remains close to parity versus the British pound.

In London trade on Friday, the euro changed hands at 1.3958 dollars against 1.3969 dollars late on Wednesday, at 127.31 yen (126.56), 0.9592 pounds (0.9552) and 1.4887 Swiss francs (1.4898).

The dollar stood at 91.22 yen (90.63) and 1.0668 Swiss francs (1.0669).

The pound was at 1.4552 dollars (1.4613).

On the London Bullion Market, the price of gold climbed to 873.25 dollars an ounce from 865 dollars on Wednesday.