Although Markit's latest Purchasing Managers' Indexes (PMIs) released November 22, offered little reason for joy, the single currency nevertheless advanced to a two-month high on positive manufacturing data from China. And while the day was considered “quiet” on account of the US Thanksgiving holiday, the yen did manage to post its steepest decline in seven and a half months versus the US dollar, as reported by Reuters.
Euro Hits a Two-Week High
The euro, which on November 21 slid due to the lack of an agreement on Greece’s funding, rose to a two-week high, with an industry report from China showing that the manufacturing sector of the world’s second largest economy expanded in November. Bloomberg reported that the single currency climbed against most of its major 16 peers, gaining 0.4 percent to $1.2881, and 0.5 percent to ¥106.42. Earlier, however, the euro touched $1.2884, the highest since November 2, and ¥106.58, its best performance versus the yen since April 30.
“The China index was good and the euro-region data were a little bit above expectations, even though they showed contraction, so that is positive for the euro,” pointed out Lutz Karpowitz, a senior foreign-exchange strategist at Commerzbank AG (ETR:CBK), as quoted by Bloomberg. Despite being above expectations, the Eurozone data was hardly positive with the flash service sector PMI falling to 45.7 in November, its lowest reading since July 2009. The PMI composite output index, however, was up from 45.7 in October to 45.8 in November, with any number below 50 indicating contraction.
The euro was also boosted by Greece-related optimism, with German Chancellor Angela Merkel signalling on November 21 that there was a chance for a Greek deal next week. “The driving factors behind euro/dollar are the global macroeconomic backdrop seems to be improving and people are pricing out the tail risk on Greece... There is less concern about whether a deal on Greece will eventually be struck,” pointed out Arne Lohmann Rasmussen, Danske Bank (CPH:DANSKE) head of currency research, as quoted by Reuters.
Yen Sliding to a Seven and a Half Month Low vs. the Greenback
The yen, which is headed for a weekly decline against its major peers, hit a seven and a half month low versus the US and the Australian dollar, as reported by Reuters. Japan’s currency, which this week suffers from speculation of aggressive monetary easing after the upcoming December elections, declined versus the greenback, with the dollar rising to ¥82.84, the highest since early April. Reuters quotes analysts as seeing the weakness of Japan’s currency persisting until the election in December. “We think the yen will continue to weaken against the dollar related to elections on December 16 when the BOJ is expected to be more aggressive in its easing...but the move has been a bit too fast,” notes Marcus Hettinger, Global FX Strategist at Credit Suisse (NYSE:CRP), as quoted by Reuters.
Real Rallies from a Three-Year Low
Brazil’s real made the forex headlines for a second day in a row, rebounding from a three-year low. Bloomberg reported that Brazil’s currency advanced 0.4 percent to 2.0903 per dollar, after dropping to 2.0985 on November 21, the real’s weakest close since May 2009. The real was boosted by the positive manufacturing data coming from China, Brazil’s top trading partner. “The Chinese economy is stabilising, which is very positive for countries like Brazil that have a strong trade relationship,” noted Luciano Rostagno, the chief strategist at Banco WestLB do Brasil SA, as quoted by Bloomberg.