Last updated: April 2, 2013 9:24 pm

Record eurozone unemployment hurts euro

Euro Coin©Reuters

The euro fell against other major currencies on concerns over the health of the eurozone economy as the single currency struggled to recover from losses after the Cyprus bailout.

The euro dipped 0.2 per cent against the dollar to trade below $1.2850 as figures showed that eurozone unemployment hit a record high of 12 per cent in both February and January, after numbers for the first month of the year were revised upwards from 11.9 per cent.

The single currency had already come under pressure after figures showed that eurozone manufacturing activity hit a three-month low in March, although the contraction in the sector was slightly less than previously estimated, data from Markit showed.

The UK pound fell on concerns over the health of the UK economy, after figures showed mortgage approvals declined for the second month in a row while Markit data suggested that manufacturing activity contracted again in March, albeit at a slower rate than the previous month. Sterling fell 0.8 per cent against the dollar to $1.5100 and was 0.6 per cent lower against the euro at €1.1776.

The Japanese yen reversed earlier gains against the dollar and the euro ahead of the Bank of Japan’s two-day meeting this week as traders positioned themselves for expected changes to the BoJ’s monetary policy. The yen has been on a strengthening trend in recent weeks ahead of the BoJ meeting amid caution over whether the BoJ will surprise investors.

“With the remaining risks for global markets becoming rather more apparent in recent weeks, we should not entirely dismiss the possibility of a sharp reversal in post November trend towards yen weakness emerging,” said Simon Derrick, foreign currency strategist at BNY Mellon.

The dollar rose 0.2 per cent to Y93.56 and the euro rose 0.1 per cent to Y120.14.

The Australian dollar rose 0.2 per cent to $1.0446 after the Reserve Bank of Australia kept interest rates on hold at 3 per cent, maintaining the country’s status as the developed nation with the highest yielding currency.

But the central bank repeated previous warnings that its inflation forecasts “left scope” to ease further in the future if needed.

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