Euro rebounds from three-week trough

The euro recovered from sinking to a three-week low against the dollar on Monday as manufacturing data from the euro bloc was better than anticipated, but continued doubts about Spain’s bailout kept gains limited.

The manufacturing sector in France deteriorated dramatically last month, while Germany’s Purchasing Managers’ Index went up to 47.4 the same month. It was Germany’s highest reading since March, but remained below the score of 50 which separates expansion from contraction.

Italy and Spain’s PMIs were also not as bad as had been feared, offering some relief for the single currency, which had felt the effects of worries about the region’s banking sector and sovereign debt.

The euro was last seen up by 0.3 per cent at $1.2895, but some analysts claimed its resilience was not so much as a result of improved eurozone confidence but more down to dollar weakness on the back of the US Federal Reserve’s decision last month to kick off a fresh wave of monetary easing.

Rabobank senior currency strategist Jane Foley said that people are finding reasons to purchase the euro as they don’t want too many dollars only to feel the effect of the Fed’s easing. She added the Spanish concerns could push the euro-dollar slight lower, with the potential of hitting $1.26, but that should it fall to that it won’t be there for long.