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US DOLLAR INDEX

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Euro struggles near three-year low as traders fret about economic slowdown

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02/17/2020 | 10:29am EDT
FILE PHOTO: Euro currency bills are pictured at the Croatian National Bank in Zagreb

The euro struggled near 3-year lows on Monday as investors worried about weakening growth in the region, while Chinese efforts to limit the damage from a coronavirus outbreak appeared to calm markets, with the yuan and Australian dollar supported.

Monday is light on economic data but traders are looking to a German business sentiment indicator due Tuesday and flash purchasing managers indexes on Friday for further evidence on the state of the euro zone economy.

Last week data showed in particular that momentum in Germany, the region's powerhouse economy, was struggling.

"EUR/USD seems to be comfortably trading around its new lows and in the next few days we expect to see a continuation in the recent downtrend rather than any clear rebound," said ING analysts.

"The fears around the coronavirus impact on the Eurozone economy remain well in place while data this week should be in line with latest releases in providing a non-encouraging picture."

The euro inched higher to $1.0836 <EUR=EBS> after earlier falling to $1.0817, its weakest since mid-2017.

The currency has lost 2.3% of its value against the dollar so far in February.

Kit Juckes, an analyst at Societe Generale, said that while data shows that the market is building a short euro position, "it remains a long way from its peaks".

GRAPHIC: Euro vs U.S. dollar - https://fingfx.thomsonreuters.com/gfx/mkt/13/2198/2166/euro%20feb%2017.png

It was a quiet start to the week elsewhere, with the United States off for a public holiday.

The yen was unfazed by weak economic growth data in Japan. It traded down slightly at 109.91 yen per dollar <JPY=EBS>.

Japan, the world's third-largest economy, shrank 1.6% in the three months to December, the largest drop in six years, hit by a sales tax hike.

With growth faltering in the euro zone and Japan, most market players expect the U.S. economy to remain stronger among its developed world peers, although retail sales and industrial production numbers on Friday were disappointing.

The dollar index stood at 99.145 and earlier hit 99.180, its strongest since early October.

The Australian dollar held firm as investors assessed the latest reading on the coronavirus in China, where the number of cases rose but new deaths dropped.

The Aussie, used as a proxy for risk on Chinese assets, stood unchanged at $0.6717 <AUD=D3>. The currency has partly been supported by expectations of stimulus from Beijing.

The offshore Chinese yuan <CNH=EBS> gained 0.1% to 6.9838 per dollar.

Some analysts think the market may be underestimating the hit from the coronavirus on both China's economy and on growth in the rest of the world, especially Asia.

"For China, our new base case is 3.0% GDP growth in Q1, with the risk firmly skewed to an even lower number - too much damage has already been done and initial policy stimulus will not be very effective," Nomura strategists said in a research note.

Sterling slipped 0.3% to $1.3012 <GBP=D3>, reversing some of its gains last week when the appointment of a new British finance minister raised expectations that the government would significantly lift public spending in next month's budget.

(Reporting by Tommy Reggiori Wilkes; Editing by William Maclean and Gareth Jones)

Stocks mentioned in the article
ChangeLast1st jan.
AUSTRALIAN DOLLAR / CANADIAN DOLLAR (AUD/CAD) -1.07% 0.84741 Delayed Quote.-5.34%
AUSTRALIAN DOLLAR / JAPANESE YEN (AUD/JPY) -0.75% 65.083 Delayed Quote.-14.29%
AUSTRALIAN DOLLAR / NEW ZEALAND DOLLAR (AUD/NZD) -0.13% 1.0241 Delayed Quote.-1.67%
AUSTRALIAN DOLLAR / SWISS FRANC (AUD/CHF) -0.68% 0.58662 Delayed Quote.-13.21%
AUSTRALIAN DOLLAR / US DOLLAR (AUD/USD) -1.12% 0.59986 Delayed Quote.-13.19%
BRITISH POUND / AUSTRALIAN DOLLAR (GBP/AUD) -0.11% 2.03892 Delayed Quote.7.53%
BRITISH POUND / JAPANESE YEN (GBP/JPY) -0.88% 132.708 Delayed Quote.-7.85%
CANADIAN DOLLAR / JAPANESE YEN (CAD/JPY) 0.34% 76.786 Delayed Quote.-9.39%
EURO / AUSTRALIAN DOLLAR (EUR/AUD) 0.57% 1.79818 Delayed Quote.12.54%
EURO / JAPANESE YEN (EUR/JPY) -0.21% 117.044 Delayed Quote.-3.55%
EURO / US DOLLAR (EUR/USD) -0.59% 1.07877 Delayed Quote.-3.27%
JAPANESE YEN / SWISS FRANC (JPY/CHF) 0.08% 0.9013 Delayed Quote.1.10%
NEW ZEALAND DOLLAR / JAPANESE YEN (NZD/JPY) -0.60% 63.547 Delayed Quote.-12.84%
NOMURA CO., LTD. -2.26% 820 End-of-day quote.-3.19%
UNITED STATES DOLLAR (B) / CHINESE YUAN IN HONG KONG (USD/CNH) 0.35% 7.1117 Delayed Quote.1.88%
US DOLLAR / CHINESE YUAN RENMINBI (USD/CNY) 0.13% 7.0907 Delayed Quote.1.97%
US DOLLAR / JAPANESE YEN (USD/JPY) 0.38% 108.495 Delayed Quote.-1.29%
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