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FOREX-Euro hits 5-mth low vs dlr, China dents risk trades

Published 01/20/2010, 01:58 AM
Updated 01/20/2010, 02:00 AM
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* Euro triggers stops under $1.4250, hits 5-mth low vs GBP

* Euro vulnerable on concern over Greece, soft data

* Kiwi hurt by inflation numbers, drags Aussie lower

* China lending curb weighs on risk trades

By Satomi Noguchi

TOKYO, Jan 20 (Reuters) - The euro fell broadly on Wednesday, hitting a five-month low against the dollar on concern about Greece's fiscal problems and breaking below a key chart level that could signal a bearish trend for the currency.

The euro's slide below its 200-day moving average of around $1.4296 initially gave investors a technical sign to sell the currency, and its break below $1.4250 and then lows of December and September later triggered loss-cutting orders and sparked broad euro-selling, traders said.

The euro dropped to a five-month trough versus sterling.

"We still need to see whether the euro's fall will be temporary or something of a big trend. But one thing that's clear for now is that people are in the mood to get out of risky bets, including on the Aussie," said a senior trader for a Japanese securities firm.

The euro was hurt in the previous session by a bigger-than-expected decline in German investor sentiment, which added to woes inflicted by flagging market confidence in Greek public finances.

Analysts say concerns about Greece and other European union members' ability to deal with swelling budget deficits combined with lacklustre growth will weigh on the euro.

The euro fell as far as $1.4166, its weakest since mid-August, after taking out its September low of $1.4177 from which it resumed its bull run to a November high of $1.5145.

It later recovered to $1.4190 but was still down 0.7 percent on the day.

"The move has been brewing for a few days," said Gerrard Katz, regional head of FX trading at Standard Chartered in Hong Kong.

"Previously there has been good demand when the euro has dipped down to these kind of levels. But this time it feels heavy," he said.

Against sterling, the euro slid as low as 86.98 pence, the lowest since late August, before trading at 87.11 pence, down 0.2 percent.

The euro fell 0.6 percent to 129.48 yen.

The dollar index, a gauge of the greenback's performance against six other major currencies, was up 0.6 percent at 77.924.

The dollar held firm at 91.18 yen, recovering from a four-week low of 90.31 yen hit in the previous session on trading platform EBS. It managed to hold above the key 90.05/35 support zone, helped partly by higher yields on U.S. Treasuries.

CHINA TIGHTENS LENDING, AUD AND NZD LOSSES DEEPEN

Official media and bank sources said Chinese banking authorities had instructed major banks to curb their lending over the rest of this month, which traders said hurt demand for the Aussie and New Zealand dollars.

Any sign China is reining in lending and excessive liquidity usually hurts commodity-linked currencies. Shares in Shanghai fell 2.5 percent.

"The dollar is recovering, except against the yen, because of the tightening by China. This is weighing on the risk currencies," said Masafumi Yamamoto, chief FX strategist Japan at Barclays Capital in Tokyo.

Earlier in the day, the New Zealand dollar dropped after softer-than-expected inflation data cooled expectations of an interest rate rise anytime soon.

That dragged down the Aussie as the Australian consumer price index figures have a habit of echoing surprises in the Kiwi numbers.

That means there is a risk that next week's Aussie CPI report could be softer than expected.

The kiwi dropped 1.2 percent to $0.7273, while the Aussie fell 0.9 percent to $0.9155. Both currencies also lost about 1 percent against the yen. (Additional reporting by Anirban Nag in Sydney and Charlotte Cooper in Tokyo; Editing by Edwina Gibbs)

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