Euro knocked by euro zone factory gloom

Wed May 2, 2012 6:47am EDT
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By Jessica Mortimer

LONDON (Reuters) - The euro fell against the dollar on Wednesday after weak manufacturing data raised concerns about the euro zone economy and was vulnerable before elections in France and Greece which could dent austerity plans drawn up to beat the debt crisis.

The factory number contrasted with better U.S. manufacturing data and weighed heavily on the euro, particularly given that purchasing managers data were weak not just in indebted peripheral euro zone countries but in France and Germany too.

Italy's manufacturing sector shrank far more than expected, with new orders tumbling at their fastest rate in three years, while data out of Germany, Spain and France also revealed factory activity falling significantly.

The euro fell 0.75 percent to hit $1.3134, its lowest in more than a week. This took it well below a one-month peak of $1.3284 hit the previous day, although it stayed above chart support at the 100-day moving average around $1.3116.

"The PMI numbers were pretty dreadful ... There is clear pressure on euro/dollar now and it is looking likely to fall towards $1.31, the lower end of the recent range" said Jennifer Hau, currency strategist at Lloyds.

"There is no expected policy change from the ECB but the market will be looking at what Draghi says about the weaker numbers and about possible further steps it may take".

The ECB meets on Thursday In Spain, with pressure back on the bank to use its bond buying and other powers to shield weaker euro members from additional pain.

Further data showed euro zone unemployment rose to match its record high of 10.9 percent last seen 15 years ago, while the dollar was supported after U.S. figures on Tuesday showed the strongest factory growth in 10 months.   Continued...

The Japanese Yen's exchange rate against U.S. dollar (C) which is displayed on an electronic board, is reflected on rain drops on the window of the board outside a brokerage in Tokyo May 2, 2012. REUTERS/Kim Kyung-Hoon