Forex Information and Trading News

Euro lower against dollar after weak German data

The euro weakened against the dollar after softer-than-expected German manufacturing orders data and as the US currency continued to pick up after the release of strong US jobs data on Friday.

Figures released this morning showed German manufacturing orders rose by a modest 1.2 pct in August from July, below analysts’ forecasts for a bigger 1.7 pct increase to correct July’s very disappointing 6.1 pct decline.

The data confirm that the euro zone’s largest economy is losing momentum and further suggest that the European Central Bank is unlikely to raise interest rates further.

‘For the ECB, this should be a further reason to stay firmly on hold far into 2008 despite a likely temporary surge in inflation,’ said Holger Schmieding at the Bank of America.

Meanwhile, the dollar continues to gain after a strong US jobs report on Friday caused markets to reassess the extent to which the Federal Reserve is likely to cut interest rates.

The report showed a 110,000 rise in jobs in September, roughly in line with expectations, while August’s 4,000 decline was revised up to a gain of 89,000.

The dollar has also been helped by comments to the Financial Times from outgoing head of the International Monetary Fund Rodrigo de Rato, who said the dollar was undervalued. As he will be leaving office in a few weeks, Rato spoke frankly on foreign exchange issues ahead of the G7 meeting later this month, and said policymakers ‘need to keep an eye on’ the dollar’s weakness.

Additionally, the US currency is set to benefit further from expected jawboning by European politicians on the strength of the euro at this evening’s gathering of euro zone finance ministers in Luxembourg.

The scene was set when earlier today German economy minister Michael Glos commented on the sidelines of a steel industry conference that the euro is a matter of concern to Germany.

‘The weak dollar generally worries us, especially if it should weaken further,’ he said.

Elsewhere, the yen and the Swiss franc were weaker as renewed levels of risk appetite caused investors to move away from low-yielding assets.

The high-yielding Australian dollar was very strong, however, earlier hitting a 23-year high of 0.9031 against its US counterpart on speculation that the Reserve Bank of Australia will raise interest rates once more this year. These strong levels above 0.90 usd have sparked profit-taking, however, and the currency has edged off its highs.

With North American markets closed, trading on currency markets has been relatively thin.