Euro Holds Loss Before PMI, Sentiment Data; Aussie Surges

The euro weakened for a second day against the dollar before reports that economists said will show Europe’s debt turmoil is weighing on economic growth.

The 17-nation currency fell versus 14 of its 16 major counterparts as investors questioned whether Spain will seek a financial bailout. Reports today are forecast to show manufacturing and services industries in the euro area contracted for a ninth month and German business confidence was close to the lowest since February 2010. The Australian dollar rose after an industry report signaled that a slowdown in Chinese manufacturing is abating.

“We would see a bit more downside in the near term for the euro,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp., Australia’s second-largest lender. “Economic numbers are hurting the euro and the lack of a Spanish bailout is also hurting.”

The euro dropped 0.1 percent to $1.2971 at 8:36 a.m. London time after declining to $1.2952 yesterday, the weakest level since Oct. 16. The shared currency fell 0.1 percent to 103.57 yen. The yen was little changed at 79.83 per dollar.

A composite index based on a survey of purchasing managers in manufacturing and services industries in the euro area was at 46.5 in October, below the 50 level which indicates a contraction, according to the median estimate of economists surveyed by Bloomberg News.

Business Climate

Economists in a separate Bloomberg survey estimate the Ifo institute’s index of German business climate index was at 101.6 this month from 101.4 in September, the lowest since February 2010. Data yesterday showed a gauge of sentiment among French factory executives dropped to the least since August 2009 and Spain’s economy contracted for a fifth quarter.

Spanish Prime Minister Mariano Rajoy said yesterday there is a case for easing budget-deficit targets set by the European Union as the recession undermines tax revenue. Rajoy didn’t mention seeking aid even as he praised the European Central Bank’s offer to help lower troubled countries’ borrowing costs. Spain’s 10-year bond yield climbed 13 basis points yesterday to 5.62 percent. It was at 5.65 percent today.

Australia’s dollar rose for the first time in five days against the U.S. currency after HSBC Holdings Plc and Markit Economics said a preliminary reading of a purchasing managers’ index for China climbed to 49.1 in October from 47.9 last month. China is Australia’s biggest trading partner.

“A pause in the slowdown of the Chinese economy is positive for market sentiment overall,” said Masafumi Yamamoto, chief foreign-exchange strategist in Tokyo at Barclays Plc.

Consumer Prices

Australia’s currency also strengthened after data showed the nation’s consumer prices accelerated more than economists estimated in the third quarter, giving the central bank scope to pause next month in cutting interest rates.

The so-called trimmed mean gauge of core price rose 0.7 percent from the previous quarter, the Bureau of Statistics said in Sydney, compared with an economists’ forecast of a 0.6 percent gain.

“The inflation data may have reduced the risk for rate cuts in the immediate term,” said Callum Henderson, Singapore-based global head of currency research at Standard Chartered Plc. “In the short term, we may see the Aussie run back up to $1.04.”

The so-called Aussie appreciated 0.4 percent to $1.0304, and gained 0.3 percent to 82.23 yen.

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