World Economy

Euro Tumbles Amid Signs of Economic Weakness

Euro Tumbles Amid Signs of Economic WeaknessEuro Tumbles Amid Signs of Economic Weakness

The euro’s April rally, its biggest since 2010, was already a distant memory as the single currency extended Friday’s declines against the dollar.

It also dropped versus all but one of its 16 major peers. A report showed signs of a slowdown in the region’s manufacturing industry before data later this week which, according to analysts, will show the US recovery is gathering pace, Bloomberg reported.

“The recent rally in the euro was driven by weakness in the US data rather than strength in the European economy,” said Roberto Mialich, a senior foreign-exchange strategist at UniCredit Bank AG in Milan. “While we’re more optimistic about the euro region, we still think that the euro will continue to be weak as the economy doesn’t warrant a strong currency.”

The euro slipped 0.3 percent to $1.1165 as of 8:51 a.m. New York time, after surging 4.6 percent in April, its first advance since the middle of last year. It fell 0.3 percent to 134.15 yen.

The 19-nation currency held on to its declines after Markit Economics Ltd.’s Purchasing Managers Index of manufacturing output dropped to 52 in April, from 52.2 the previous month.

“That’s still an underwhelming recovery,” Lena Komileva, chief economist at G Plus Economics Ltd. in London, wrote in an e-mailed note. “Looking at the April breakdown, the euro zone PMIs remain a mixed tale of cyclical improvement and structural weakness.”

 Biggest Loser

Even with last month’s rally, the euro remains the worst performer of 2015 among 10 developed-nation peers tracked by Bloomberg Correlation-Weighted Currency Indexes. It fell 5.7 percent versus the group, compared with a 3.1 percent gain by the dollar.

“The up move that we saw in recent weeks was more a correction of excessive levels,” said Ulrich Leuchtmann, head of currency strategy at Commerzbank AG in Frankfurt. “Few people see fundamental reasons for a much higher euro against the dollar.”

Monday’s decline was exacerbated by thin trading volumes, UniCredit’s Mialich said. Financial markets are closed in Japan, Thailand, Malaysia, India and the UK for holidays.

Hedge funds and other large speculators reduced net wagers on a weaker euro last week after positioning reached a record high at the end of March, data from the Commodity Futures Trading Commission in Washington show.

Net shorts totaled 197,766 contracts as of April 28, down from 214,645 a week earlier and a record 226,560 on March 31.