Euro Trades Near 1-Week Low


The euro traded near a one-week low against the dollar before a report today that economists forecast will show growth in German industrial production slowed in May.

Signs of slowing growth in the region's largest economy may deter the European Central Bank from increasing borrowing costs, diminishing the allure of euro-denominated assets. The dollar may be supported by speculation leaders from the Group of Eight nations will signal they favor a stronger U.S. currency.

The euro traded at $1.5699 against the dollar as of 8:14 a.m. in Tokyo from $1.5706 on July 4 in New York. It bought 167.64 yen from 167.73. The dollar traded at 106.79 yen from 106.80. Europe's single currency may move between $1.5650 and $1.5750 today, Nishii forecast.

Annual growth in German industrial production slowed in May to 3.5 percent, from 4.8 percent the prior month, according to the median forecast of 27 analysts surveyed by Bloomberg News. It would be the slowest pace since August 2005. The Bundesbank in Frankfurt will release the data at noon today.

The 15-nation currency last week posted its first weekly decline since mid-June against the dollar after ECB President Jean-Claude Trichet said he has ``no bias'' following the decision to raise the main refinancing rate by a quarter- percentage point to 4.25 percent.

German manufacturing orders unexpectedly declined for a sixth straight month in May, providing further evidence the economy is losing momentum. Orders, adjusted for seasonal swings and inflation, fell 0.9 percent from April, the Economy Ministry in Berlin said on July 4. Economists expected a gain of 0.8 percent, according to a Bloomberg News survey.

The yield advantage of two-year German bunds over comparable-maturity Treasuries narrowed to 1.87 percentage points from 1.98 points a week ago, approaching the least level since June 27.


TradingEconomics.com, Bloomberg
7/6/2008 5:29:51 PM