FOREX-Growth worries hurt euro;dollar falls on mixed data

Published 09/23/2010, 12:17 PM
Updated 09/23/2010, 12:20 PM

* Euro stung by Ireland bank woes, weak economic data

* Dollar falls vs yen on unexpected rise in jobless claims

* Dollar touches lowest vs yen since BOJ intervention (Adds comments, details. Updates prices)

By Vivianne Rodrigues

NEW YORK, Sept 23 (Reuters) - The euro fell from a five-month high versus the dollar on Thursday, weighed by worries over Ireland's economy and banking sector, which underlined concern over the euro zone periphery.

Other data suggesting growth in the euro zone slowed in September also contributed to the declines in the single currency as it raised concerns about the region's recovery.

A 1.2 percent fall in second quarter Irish GDP from the first quarter confounded forecasts for a 0.5 percent rise and highlighted the struggles facing Ireland as it tries to shore up its banking sector.

In the United States, data was mixed. The dollar fell versus the yen after a report showed an unexpected rise in weekly jobless claims, while another release showed existing home sales rose in August.

"Overall the sentiment is pretty negative today, with several pieces of data in Europe, such as the Irish GDP data hurting the euro," said Matthew Strauss, a senior currency strategist at RBC Capital Markets in Toronto.

"It will be hard to see a sustained push above 1.34 in euro/dollar with that type of data and concerns over the euro zone periphery looming," he added. "But with weak data in the U.S. as well and the possibility of further quantitative easing by the Fed looming, it will be also hard to justify pushing the dollar much higher now."

Uncertainty over the cost of propping up its banking sector has triggered concerns Ireland is on the tip of a debt crisis that could drag down other peripheral euro zone economies.

On Wednesday, Ireland said there was no chance it or its ailing banks would default on its debt. The government has extended a guarantee for the short-term liabilities of its banks, while withdrawing guarantees on some types of bank debt at the end of the month.

Pessimism about Ireland pushed yield spreads between 10-year government bonds in Ireland and Germany -- the most economically sound euro zone country -- to their widest ever.

By late morning trading in New York, the euro was down 0.4 percent on the day at $1.3345, off $1.3441 hit on Wednesday, its highest since April, when the dollar came under broad selling pressure on speculation the Federal Reserve will implement more monetary easing soon.

Analysts said a weak euro zone purchasing managers' survey had cast doubt over the European recovery, helping the dollar recover from losses suffered earlier this week on the view that more quantitative easing would lead to a further depreciation in the U.S. currency.

A euro rise above $1.3400 in early European trade triggered selling from Asian accounts, traders said, but it hovered above its 200-day moving average around $1.3208.

The euro also fell versus the yen, the Swiss franc and sterling.

YEN SUBDUED

The dollar fell versus the yen to its lowest level since the Bank of Japan intervened on Sept. 15 to weaken the Japanese currency.

The dollar was last down 0.2 percent at 84.31 yen, but earlier it slid as low as 84.26 on EBS trading platform.

Japanese authorities intervened in the currency market last week for the first time in six years when the dollar fell to a 15-year low of 82.87 yen on EBS.

"The yen would be a lot stronger if not for intervention and the threat of intervention," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ.

"The drop in short-term U.S. yields is more consistent with 80 yen rather than 85 yen," he said, adding Japanese authorities would likely come into the market again at around 82-83 yen.

Markets in Tokyo were closed on Thursday for a national holiday, but Japanese Prime Minister Naoto Kan was set to meet U.S. President Barack Obama on Thursday.

Obama will also meet Chinese Premier Wen Jiabao, who pushed back against pressure to revalue the yuan as U.S. lawmakers threatened to penalize China. (Additional reporting by Steven C. Johnson in New York and Naomi Tajitsu in London; Editing by Andrea Ricci)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2025 - Fusion Media Limited. All Rights Reserved.