U.S. dollar hits 8-month high against euro on weak German Ifo

NEW YORK Sat Jul 26, 2014 2:13am IST

A money changer holds stacks of US dollar notes in Jakarta, August 29, 2013. REUTERS/Beawiharta

A money changer holds stacks of US dollar notes in Jakarta, August 29, 2013.

Credit: Reuters/Beawiharta

NEW YORK (Reuters) - The U.S. dollar hit an eight-month high against the euro on Friday after weak data on German business sentiment heightened concerns that geopolitical tensions were weighing on the euro zone economy.

Germany's Ifo business climate index, based on a monthly survey of some 7,000 firms, fell to 108.0 in July, marking a third consecutive monthly decline and missing estimates of 109.4, according to a Reuters poll of economists.

"We continue to get strong economic releases out of the United States," said Richard Scalone, co-head of foreign exchange at TJM Brokerage in Chicago. "At the same time, we are getting not-so-great economic releases out of Europe."

Scalone said data on Thursday showing that U.S. weekly jobless claims hit their lowest level since 2006 bolstered views of an improving U.S. labor market. Earlier this month, data showed a surge in U.S. nonfarm payrolls growth in June.

Analysts said the weak German business sentiment underscored the impact of tensions surrounding Russia and Ukraine on Germany, Europe's biggest economy. The potential impact of hard-hitting sanctions against Russia also likely hurt business confidence in Germany, they said.

European Union ambassadors reached a preliminary agreement on Friday to push ahead with sanctions against Russia but details have yet to be worked out, diplomats said. Analysts have said that the sanctions could hurt European growth by hindering trade between Russia and Germany.

"The geopolitical tension and uncertainty are already exerting a palpable effect on sentiment toward Europe and the euro," said Richard Franulovich, senior currency strategist at Westpac Securities in New York.

The dollar rose against the euro after Commerce Department data showed orders for long-lasting U.S. manufactured goods rose more than expected in June, but analysts said the positive impact faded after traders assessed lackluster details, including downward revisions for May.

The euro was last down 0.27 percent against the dollar at $1.3429 after falling to an eight-month low of $1.34210. The dollar was up 0.03 percent against the Japanese yen at 101.83 yen.

Against the Swiss franc, the dollar was last up 0.23 percent, to trade at 0.90480 franc after earlier hitting a five-month high of 0.90520 franc. The U.S. dollar index, which measures the dollar against a basket of six major currencies, was last up 0.22 percent at 81.047.

Analysts eyed next week's Federal Reserve policy meeting, on Tuesday and Wednesday, and the U.S. government's nonfarm payrolls report for July, to be released on Friday. Economists expect U.S. employers to have added 235,000 jobs in July, according to a Reuters poll.

"There is a chance of a bit more hawkish tone to the Fed's statement," said Scalone of TJM Brokerage, in light of recent strong U.S. jobs growth.

(This version of the story corrects the name of firm in the final paragraph.)

(Reporting by Sam Forgione; Editing by James Dalgleish and Leslie Adler)

REUTERS SHOWCASE

WTO Trade Deal

WTO Trade Deal

WTO clinches first global trade deal in its history  Full Article 

Kashmir Attack

Kashmir Attack

Ten dead in Kashmir's worst militant attack in more than a year  Read 

OPEC Meeting

OPEC Meeting

Saudis block OPEC output cut, oil price sinks further.  Full Article 

GDP, RBI Preview

GDP, RBI Preview

GDP growth set to weaken, business wants reforms more than rate cut  Full Article | Related Story 

Social Media

Social Media

Twitter to start tracking users' mobile apps  Full Article 

Jaitley to Rajan

Jaitley to Rajan

Jaitley likely to meet Rajan on Monday to urge rate cut  Full Article 

Banking Sector

Banking Sector

India moves to allow more businesses to offer basic financial services.  Full Article 

Forever21 in India

Forever21 in India

Forever21 sets sights on Indian cities, but please hold the hot pants  Full Article 

Japan Economy

Japan Economy

Japan inflation slows in October, output and spending show signs of recovery  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage