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Data
on Thursday showed the composite flash PMI for the euro zone
fell to 53.4 from 53.9, missing the 53.8 forecast in a Reuters
poll. Despite the drop, data compiler Markit said, the euro zone
is on track to grow at 0.4 percent in the current quarter.
The euro touched a high of $1.1182, up 0.7 percent on the day
and off a three-week low of $1.1062 struck on Wednesday. It had
started to rise in early London trade after the French PMI
survey beat expectations.
It extended those gains amid a rise in German 10-year Bund
yields, which jumped 6 basis points to a day's high of 0.68
percent. That saw the spread between German bund yields and
Treasuries narrow to around 158 basis points.
"The narrowing of yield spreads over U.S. Treasuries is having
an impact on euro/dollar," said Jeremy Stretch, head of currency
strategy at CIBC World Markets. "Having said that, I would still
prefer to sell the euro above $1.12."
Part of the reason for gains in the euro remaining limited is a
very accommodative monetary policy stance by the European
Central Bank. Earlier this week, board member Benoit Coeure said
the central bank looked to accelerate the pace of money printing
to buy government bonds over the next two months.
The prospect of more euros flooding onto the market saw the
common currency move lower across the board earlier this week.
"In the first-quarter, data from the euro area was positive, but
in April and May it's showing signs of a slowdown. All in all,
it's too early for any tapering in the quantitative easing
programme by the ECB," said Yujiro Goto, currency strategist at
Nomura. "We think the euro will gradually decline."
The euro's gains saw the dollar step back from a two-week peak
against a basket of major currencies with the minutes from the
Federal Reserve's latest meeting offering no major surprises for
investors. It did little to change expectations that the Fed
will probably wait until late this year before raising interest
rates.
The minutes showed policymakers believed it would be premature
to raise rates in June, in line with a view widely held in the
market after a dismal start to the year.
The dollar index stood at 95.082, having risen as high as 95.837
on Wednesday. Against the yen, the greenback fell 0.3 percent to
121 yen, having hit a two-month peak of 121.49 on Wednesday.
Another big mover in the European session was sterling. It rose
1 percent against the dollar to $1.57 after UK retail sales beat
expectations. [GBP/]
(Editing by Mark Heinrich)
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