The euro fell versus the majority of its 16 most-traded peers as a report showed unemployment in the 17-nation currency bloc climbed to a record in February, adding to concern the economy will struggle to emerge from recession.
The single currency declined against the dollar as a purchasing-manager index of manufacturing stayed below the level that shows contraction. Sweden’s krona gained for a second day versus the dollar after a factory index rose. Australia’s dollar advanced after the Reserve Bank said existing stimulus was working. The European Central Bank meets on April 4.
“The PMI data was universally soft, and that’s pushed the euro lower,” Jack Spitz, Toronto-based managing director of foreign exchange at National Bank of Canada, said in a telephone interview. “There’s still downside risk with respect to structural issues and ahead of the ECB, which is expected to guide more dovishly given the economic misses.”
The euro weakened 0.2% to $1.2823 at 10:38 a.m. in New York. The 17-nation currency was little changed at 119.84 yen after falling earlier to 119.15, the weakest level since Feb 26. Japan’s currency fell 0.3% to 93.46 per dollar.
The dollar remained higher versus Europe’s shared currency after Commerce Department data showed orders placed with U.S. factories increased 3% in February.
Unemployment in the euro area rose to 12% and the January figure was revised up to the same level from 11.9% estimated earlier, the European Union’s statistics office said. That’s the highest since the data series started in 1995. A gauge of manufacturing in the region slid to 46.8 last month from 47.9 in February, Markit Economics said. A reading below 50 indicates contraction.
“Euro-area PMIs are stuck in recessionary territory,” said Lee Hardman, a currency strategist at Bank of Tokyo- Mitsubishi UFJ Ltd. in London. “The ECB will acknowledge this week that the pace of economic recovery remains disappointingly weak, which will dampen upside potential for the euro.”
The krona gained all of its major peers except the New Zealand dollar as Stockholm-based Swedbank ABA said a PMI for the country advanced to 52.1 in March from 50.9 the previous month. A reading higher than 50 indicates growth.
The krona appreciated 0.5% to 6.4828 per dollar after rising 0.2% yesterday. The currency strengthened 0.7% to 8.3124 per euro.
China’s yuan jumped the most since December and strengthened beyond 6.20 per dollar for the first time in 19 years after the central bank set a record reference rate for the currency.
The People’s Bank of China raised the fixing by 0.14%, the most since Feb. 8, to 6.2586 per dollar today. The yuan is allowed to trade 1% on either side of the rate.
The yuan rose 0.15% to close at 6.1986 per dollar in Shanghai, according to prices from the China Foreign Exchange Trade System.
The Aussie dollar gained as the Reserve Bank of Australia kept its key interest rate unchanged and Governor Glenn Stevens said “there are a number of indications that the substantial easing of monetary policy during late 2011 and 2012 is having an expansionary effect on the economy.”
Australia’s currency rose 0.3% to $1.0457 and gained 0.5% to 97.64 yen.
New Zealand’s dollar climbed after data showed the nation’s commodity export prices gained the most in more than three years. The kiwi, as the currency is nicknamed, gained 0.7% to 84.32 U.S. cents and touched 84.46, its strongest level since Feb. 20.
The British pound weakened for the first time in four days against the dollar after a report showed U.K. factory output contracted in March more than economists forecast. Sterling touched $1.5116, a 0.7% drop, its biggest since March 8.
The euro declined 1.8% over the past month versus nine developed-nation peers, according to Bloomberg Correlation- Weighted Indexes. The dollar dropped 0.2%, while the yen gained 0.1%.
The common currency slid 2.8% versus the dollar last quarter as inconclusive elections in Italy on Feb. 24-25 left a political deadlock. President Giorgio Napolitano has formed a 10-person committee to negotiate a new government for the nation before his term expires in six weeks.
The group will have to overcome “irreconcilable positions” among the political blocs in parliament, Napolitano said on March 30 as he appointed the advisers to carry on the search for common ground.
The delay drags out the uncertainty over budget discipline in the third-largest euro-area economy as cracks in the 17- member currency are exposed by bank-deposit losses imposed in Cyprus in return for a bailout.
“The euro should continue to weaken against a wide range of currency,” Simon Derrick, London-based chief currency strategist at Bank of New York Mellon Corp., said in an interview on Bloomberg Television’s “The Pulse” with Francine Lacqua and Guy Johnson. “For the euro-dollar, $1.23 or $1.24 doesn’t seem entirely unreasonable before the summer.”