Euro pinned near 10-day lows as outlook bleak
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[November 25, 2019] By
Sujata Rao and Saikat Chatterjee
LONDON (Reuters) - The euro held near a
10-day low on Monday after posting a weekly loss as investors remained
cautious about the outlook for the euro zone economy in the near term.
Though latest data showed business morale in Germany, Europe's biggest
economy, improved slightly in November, growth prospects for the euro
zone remained uncertain as business growth in the region almost ground
to a halt this month.
While the European Central Bank has resumed its bond-buying plan and
lowered its deposit rate deeper into negative territory in September,
those stimulus measures haven't borne fruit, with the euro weakening by
1.5% so far this month.
"The economic signals looks worrisome and the euro continues to trade on
a weaker bias against the dollar," said Lee Hardman, a FX strategist at
MUFG in London.
Hedge funds have increased their negative bets against the euro, with
latest weekly data showing a small increase in overall net short
positions.
Even some positive news flow on the Sino-U.S. trade front failed to lift
enthusiasm about the euro.
"The economic data from China remains rather disappointing, and in many
other emerging markets the economic engines are not running smoothly
either," said Christoph Weil, a strategist at Commerzbank.
"The emerging interim agreement between the U.S. and China is nothing
more than a ceasefire."
Against the greenback <EUR=EBS>, the single currency edged down 0.1% to
$1.1010, its lowest level since Nov. 14. It is on track for its biggest
monthly drop since July 2019.
Broader markets remained focused on the likelihood of a trade agreement
between the United States and China by year-end, which U.S. National
Security Adviser Robert O'Brien said was still possible. The Global
Times, a tabloid run by the ruling Chinese Communist Party's official
People's Daily, also said a "phase one" deal was very close.
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U.S. dollar and Euro
notes are seen in this November 7, 2016 picture illustration.
Picture taken November 7. REUTERS/Dado Ruvic/Illustration
"Most of the inferences on the weekend (on the trade front) were positive and
markets seem to have decided to run with it," said Colin Asher, senior economist
at Mizuho.
U.S. adviser O'Brien said Washington would not turn a blind eye to events in
Hong Kong, where there are fears of a Chinese crackdown against pro-democracy
protests. Democrats scored a landslide majority in district council elections,
raising pressure on the Chinese-ruled city's leaders to listen to their demands.
The offshore Chinese yuan nevertheless firmed 0.2% against the dollar <CNH=D3>,
in line with other Asian currencies as well as the Australian and Kiwi dollars,
while the safe-haven yen retreated to a one-week low versus the greenback at
108.89 yen <CNH=D3> <AUD=D3> <NZD=D3> <JP=D3>.
The dollar index edged off the one-week high it hit on Friday against a basket
of currencies <.DXY>.
Speculators raised net long bets on the dollar to a five-week high in the week
to Nov. 19, data from the U.S. Commodity Futures Trading Commission showed. But
they added to net short euro positions.
Markets will focus later in the day on speeches by the ECB's Chief Economist
Philip Lane and U.S. Federal Reserve Chairman Jerome Powell.
Broadly, currency market volatility held near a record low on Monday as major
currencies remained trapped in tight ranges.
(Reporting by Sujata Rao and Saikat Chatterjee; Editing by Pravin Char)
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