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US dollar hits eight-month high against euro on weak German Ifo

Heightened concerns that geopolitical tensions were weighing on the euro zone economy

Mumbai: The US 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 US weekly jobless claims hit their lowest level since 2006 bolstered views of an improving US labor market.

Earlier this month, data showed a surge in US 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 US 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 US 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 US government's nonfarm payrolls report for July, to be released on Friday. Economists expect US 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 US jobs growth.

( Source : reuters )
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