Euro falls on weak manufacturing data

The euro lost ground on the US dollar on Wednesday as worse-than-expected manufacturing data heightened fears about the eurozone’s economy, reports Reuters.

Meanwhile, the yen bounced back from two-and-a-half month highs on the dollar following strong US data on Tuesday. Traders claimed the contrasts between the US and eurozone’s manufacturing sectors could heavily impact the single currency.

A purchasing managers’ survey revealed that Italy’s manufacturing sector contracted far more than anticipated, with orders falling at their quickest rate for three years. This was in addition to weaker-than-expected PMI data out of France, Spain and Germany which also showed that manufacturing activity was contracting sharply.

The euro dropped by 0.5 per cent t $1.3171, falling well below its one-month high of $1.3284 reached the previous day. Tuesday’s US data revealed that the country had delivered its strongest factory growth for 10 months.

However, markets remained cautious before US employment data on Friday, elections in Greece and France at the weekend and Thursday’s European Central Bank meeting – all of which could drive the euro down further. Volumes in Europe remained thin following the May Day holiday and traders said that this may cause exaggerated moves.

Against the yen, the greenback went up by 0.3 per cent to 80.31, way above its low of 79.640 hit on Tuesday.