The euro fell below $1.30 for the first time in two months after reports showed the region’s manufacturing contracted in February and unemployment climbed to a record.
The 17-nation currency extended a fourth weekly loss against the greenback, the longest streak since June, as signs the region remains stuck in a recession backed the case for the European Central Bank to cut interest rates. The Dollar Index rose to the highest level since August as the U.S. government’s failure to avoid automatic budget cuts, known as the sequester, spurred investors to seek safer assets. The pound tumbled after a British factory index unexpectedly shrank in February.
“It’s only a matter of time until we gyrate lower,” Peter Gorra, chief dealer in New York at BNP Paribas SA, said of the euro. “It’s hard not to say that there’s something going on in the world that means lower growth and is nervous about the sequester, and what’s going on in Europe.”
The euro fell 0.2% to $1.3029 at 1:09 p.m. New York time, extending this week’s decline to 1.3%. It traded as low as $1.2967, the least since Dec. 11. The single currency rose 0.9% to 121.12 yen, having depreciated 1% this week. The dollar strengthened 1.1% to 93.59 yen.
Technical Levels
A technical measure indicated the euro’s recent decline might turn around. The 14-day relative strength index against the U.S. dollar reached 32, at almost the 30 level that some traders see as sign that an asset may be about to reverse direction.
The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against currencies of six U.S. trading partners, gained 0.6% to 82.442, after rising to the highest since August.
The gauge may rise to match the highest level since July 2010 after completing a “bullish outside month,” Citigroup Inc. said, citing trading patterns.
Investors have sought the U.S. currency as a haven amid the standoff between Democrats and Republicans standoff over how to replace the cuts totaling $1.2 trillion during nine years, known as the sequester, $85 billion of which would occur in the remaining seven months of this fiscal year.
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