Dollar Slumps Against Euro, Stocks Steady Despite Chinese Data
New York (Mar 13) The dollar came under pressure Thursday, slumping to its weakest level against the euro since October 2011, while European stocks were steady, shrugging off another set of disappointing economic data from China.
In Italy, shares climbed after a raft of tax cuts unveiled by new Italian Prime Minister Matteo Renzi, aimed at overhauling the country's sclerotic economy, was well-received by investors.
The buck fell 0.4% against the euro to $1.3967, its weakest level since Oct. 31, 2011.
"The dollar has been undermined in the near term by the recent economic slowdown in the U.S. which has prompted the market to dampen Federal Reserve monetary tightening expectations ahead," said Lee Hardman, a currency analyst at Bank of Tokyo-Mitsubishi in London.
The world's largest economy suffered a string of disappointing economic data early this year.
In addition, current Fed policy appears "relatively more dovish" after the European Central Bank raised the hurdle for further monetary easing last week at its meeting, which is also weighing on the dollar against the euro, Mr. Hardman added.
The European currency remained buoyant despite grim economic growth data from Ireland, showing gross domestic product fell by 2.3% in the final quarter of 2013. The unexpectedly sharp drop had little effect on Irish government bonds, with 10-year yields lower on the day at 2.99%. Ireland had earlier in the day snagged its cheapest ever 10-year borrowing costs at a debt auction.
European stock markets steadied after their recent declines, despite news that China's industrial output rose by 8.6% on the year over January and February, lower than an expected 9.5% expansion.
The benchmark Stoxx Europe 600 index was up 0.1%, taking a pause from the recent selloff that has come amid heightened tensions in Ukraine and fears of a sharp slowdown in the Chinese economy. The U.K.'s FTSE 100 index was down 0.1% and Germany's DAX was up 0.2%.