The euro reversed earlier gains and fell on Friday as an August batch of business surveys pointed to a stuttering economic recovery, although the dollar remained on course for its ninth consecutive weekly decline versus rival currencies.
Flash euro zone manufacturing and services purchasing managers index (PMI) numbers for August were worse than expected. IHS Markit’s flash Composite Purchasing Managers’ Index, seen as a good gauge of economic health, sank to 51.6 from July’s final reading of 54.9.
The single currency had been falling before the results were released but then extended losses and was last down 0.5% at $1.1806.
“The latest flash PMI data for August in France and Germany would appear to point to a plateauing in economic activity, particularly in the services sector, where rising infection rates here could well be tempering economic activity on the margins,” said Michael Hewson, Chief Market Analyst at CMC Markets.
The euro has been the biggest beneficiary from a tumbling dollar in recent weeks, surging from under $1.12 in early July to a more than-two-year high of $1.1966 this week.
While the dollar rebounded on Friday it was still headed for its ninth consecutive weekly decline. Should the greenback end the week down, that would mark the longest losing streak since the summer of 2010 and a run that has only happened 5 times since 1990.
A larger-than-expected rise in weekly jobless claims in the United States and warnings from Fed officials about a recovery in hiring have raised doubts about how quickly the world’s largest economy will bounce back from the coronavirus.
Those concerns, combined with an excess supply of dollars already in circulation, are likely to weigh on the greenback in coming weeks, analysts say.
The dollar index, which measures the greenback against a basket of rivals, rose as the euro fell and was last at 93.005 , up 0.3%.
Republicans and Democrats are struggling to agree on additional stimulus to boost the economy, in contrast to the euro zone where investors have welcomed the scale of the economic packages recently launched.
Commerzbank currency analyst Ulrich Leuchtmann said that uncertainty about the dollar was undermining the greenback’s safe haven credentials.
“Everything all told: as long as the market considers the dollar to be excessively high risk a sustainable U.S. dollar recovery remains unlikely,” he said.
YUAN HITS 7-MONTH HIGH
The standout performer on Friday was China’s yuan, which in offshore markets briefly hit 6.8935, its strongest since Jan. 21, before falling back as the dollar recovered.
China’s currency has recovered all of its losses since the Chinese city of Wuhan, where the coronavirus initially broke out, was first put on lockdown, as investors bet on a strong recovery in the country’s economy.
Sterling slipped back below $1.32. It was last down 0.2% at $1.3196 while it rose versus the euro to 89.50 pence.
Currency moves elsewhere were contained. The dollar fell 0.3% versus the Japanese yen to 105.50.
– Reuters.