Euro little changed after manufacturing shrinks at slower pace

The euro held a gain from last week vs. the dollar after a report showed manufacturing in the 17-nation currency bloc contracted at a slower pace than initially estimated in May.

Europe’s shared currency pared an intraday advance after Federal Reserve Bank of San Francisco President John Williams said the central bank’s asset-purchase program has the potential to end this year. Norway’s krone, Sweden’s krona and South Africa’s rand rallied on data showing manufacturing in the three nations expanded last month. Turkey’s lira slid following a weekend of violent protests.

“The surprise in the euro-region data is lending support to the euro,” said Kasper Kirkegaard, a senior currency strategist at Danske Bank A/S in Copenhagen. “At the moment it only takes little news to send the euro higher against the dollar because the market is very long dollars.”

The euro was little changed at $1.30 at 9:09 a.m. New York time. It reached $1.3061 on May 30, the strongest level since May 9. Europe’s shared currency gained 0.4% to 1.2470 Swiss francs and fell 0.3% to 130.27 yen. Japan’s currency strengthened 0.2% to 100.27 per dollar.

The euro will trade at about $1.30 for the next three months, before dropping to $1.27 by the end of the year, Kirkegaard predicted.

Manufacturing Gauge

The euro-area manufacturing index increased to 48.3 last month from 46.7 in April, London-based Markit Economics said today. That’s above an initial estimate of 47.8 on May 23. It has been below 50, indicating contraction, since July 2011.

“There are a few signs of a possible stabilization,” European Central Bank President Mario Draghi said in a speech in Shanghai today, according to text provided by the Frankfurt- based ECB. “Our baseline scenario continues to be one of a very gradual recovery starting in the latter part of this year.”

After reducing the ECB’s benchmark interest rate to a record-low 0.5% last month, Draghi signaled he’s prepared to cut again if economic data worsen. The ECB’s Governing Council will leave borrowing costs unchanged when it meets on June 6, according to 56 of 58 economists in a Bloomberg survey.

Norway’s krone advanced versus most of its 16 major peers after a purchasing managers index climbed more than economists forecast in May. Sweden’s krona strengthened as a separate index of manufacturing jumped.

The krone advanced 0.2% to 5.8560 per dollar while Sweden’s krona also climbed 0.3%, to 6.6025 per dollar.

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