Dollar Pares Decline Against Euro After China PMI Report

The euro rose as Asian stocks gained for the first time in three days before reports forecast to show German services and factory output expanded this month.

Australia’s currency slid to its weakest in two months after a private report signaled manufacturing may shrink in China for a fifth-straight month. New Zealand’s dollar sank to a one-week low after its economy grew less than economists estimated. The yen advanced earlier after Japan posted an unexpected trade surplus for February. Declines in the dollar were limited before a report that may show initial U.S. jobless claims dropped, damping prospects of further monetary easing.

“The calming of markets in the last few months has come from policy measures, and the ability of policy makers to continue delivering supportive packages in large part stems from the strength of Germany,” said Adrian Foster, head of financial-markets research for Asia at Rabobank Groep NV in Hong Kong. “In the near-term the euro may be supported.”

The euro rose 0.2 percent to $1.3239 at 6:55 a.m. in London from yesterday, when it touched $1.3285, the strongest level since March 8. The shared currency was little changed at 110.28 yen after earlier falling as much as 0.3 percent. The yen gained 0.1 percent to 83.29 per dollar, after touching 83.14.

The MSCI Asia Pacific Index (MXAP) of stocks climbed 0.4 percent.

A measure of factory output in Germany climbed to 51 this month from 50.2 in February while a gauge of services rose to 53.1 from 52.8, according to median projections in Bloomberg News surveys of economists before the London-based Markit Economics releases data today.

Central Banks
“We’re seeing a tussle between investors who think this is a risk-on environment and therefore euro-dollar should go higher, and those that recognize balance sheet expansion by the European Central Bank” will likely weaken the euro, said Gareth Berry, a currency strategist at UBS AG in Singapore. A growing number of investors are looking at “the relative policy stance” of the ECB and the Federal Reserve, he said.

In the U.S., new applications for unemployment insurance payments probably fell by 1,000 to 350,000 in the period ended March 17, according to a Bloomberg survey of economists before the Labor Department releases its figures today. That would be the lowest since March 2008.

The Federal Open Market Committee left policy unchanged this month, noting improvements in the labor market, where the jobless rate fell to 8.3 percent in February from 9.1 percent in January 2011.

Pacific Investment Management Co., which runs the world’s biggest bond fund, is bullish on the U.S. dollar, the Wall Street Journal reported, citing Scott Mather, Pimco’s head of global portfolio management. Mather expects the euro to fall below $1.15 this year, with a decline to $1 possible, according to the report. He forecasts Australia’s currency will decline to 90 U.S. cents by the end of this year, the newspaper said.

China Manufacturing
Australia’s currency dropped for a third day after a preliminary reading of an index from HSBC Holdings Plc and Markit Economics showed Chinese manufacturing may contract. The gauge fell to 48.1 in March, the lowest level in four months and compared with a final reading of 49.6 for February. Figures below 50 indicate contraction.

The Australian dollar slid 0.5 percent to $1.0408, after earlier touching $1.0377, the lowest since Jan. 19. New Zealand’s currency declined 0.7 percent to 80.97 U.S. cents. It earlier reached 80.64, the weakest since March 15.

China is Australia’s biggest trading partner and New Zealand’s second-biggest export destination.

New Zealand’s gross domestic product rose 0.3 percent in the three months ended Dec. 31 from the previous quarter, when it increased a revised 0.7 percent, the country’s statistics bureau said today in Wellington. The median projection by economists was for growth of 0.6 percent.

Japan ‘Doing Better’
The yen rose against 11 of its 16 most-traded counterparts after Japan’s exports exceeded imports by 32.9 billion yen ($395 million) in February, according to a finance ministry report today. Economists surveyed by Bloomberg had predicted a shortfall of 120 billion yen. Exports fell by 2.7 percent from a year earlier, less than the 6.5 percent drop projected.

“The data suggest that Japan’s economy is doing better,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “From a fundamental perspective, this is likely to be positive for the yen.”

JPMorgan Chase & Co. said a short-term retracement of yen declines against the dollar may be due after yesterday’s so- called “bearish reversal” where the greenback failed to advance above a key resistance area.

“We continue to monitor the 82.85/65 support zone for confirmation of that retracement,” Niall O’Connor, a New York- based technical analyst at JPMorgan, wrote in a note to clients today. A resistance level is an area on a chart where analysts anticipate orders to sell a currency will be grouped and a support level is an area where they expect buy orders to be clustered.