March 1, 2012 / 2:31 PM / 5 years ago

FOREX-Euro falls to one-wk low after US consumption data

* Euro falls to one-week low after U.S. consumption data

* Dollar recovers as Bernanke gives no QE hint (Updates prices, adds quotes and details.)

NEW YORK, March 1 (Reuters) - The euro fell to a one-week low against the dollar on Thursday on rising risk aversion after a U.S. government report on personal spending raised doubts about the strength of the U.S. recovery.

Real personal consumption in Januarywas unchanged from the prior month, making it the third month in a row it was flat. .

The euro had already been weak before New York opened after a huge injection of cash by the European Central Bank on Wednesday and lingering concerns about debt and the fragile euro zone economy. The U.S. data only cemented the euro's losses.

"The softer income and personal spending is more of the standout," said Ray Attrill, head of FX strategy for North America at BNP Paribas in New York. "They are suggesting that the impact of higher consumer prices may be having an impact on real spending."

The euro was 0.3 percent lower at $1.3287, after touching a one-week low of $1.3280, breaking near term support at its 100-day simple moving average of $1.3293. Traders had earier said a fall below that level could push it toward $1.32.

The euro is now down around two cents from the near a three-month high of $1.3485 touched on Wednesday, according to Reuters data. The euro also posted its best monthly performance in February since October.

The dollar also gained support after U.S. Federal Reserve Chairman Ben Bernanke on Wednesday gave no signal the central bank would undertake further bond purchases. He is due to address the Senate Banking Committee later on Thursday.

EU SUMMIT

Attention on Thursday turned to a European Union summit and a meeting of euro zone finance ministers that will discuss Greece's progress on meeting the terms of its bailout. Analysts said this may highlight the risks of Greece struggling to comply with the harsh austerity measures demanded of it. .

Traders reported early euro selling by Asian central banks and macro funds, with many cutting euro positions as the ECB's injection of 530 billion euros in three-year funds had been broadly priced in.

Traders said the $1.35 level could now act as stiff resistance if the euro moves higher, with many investors looking to sell into any rally.

Morgan Stanley analysts were more upbeat on the euro's immediate prospects, raising their end-March euro/dollar forecast to $1.34 from $1.27 as the ECB's funds eased banking and sovereign debt strains. They still expect the euro to decline sharply by the end of the year, though now see it at $1.19 rather than $1.15.

Investors are mindful that the euro zone's structural debt problems could not be solved unless the economy picks up.

DOLLAR RECOVERS

But RBC analyst Adam Cole in London said more monetary easing from the U.S. was still possible and the market may have overreacted to the lack of any reference by Bernanke to more QE. This could help a modest recovery in risky assets.

"The market is likely to price out the good news from the Fed," he said, adding the euro could squeeze up to around $1.35.

U.S. data of late has genearlly surprised on the upside but unemployment remains sticky, keeping alive some expectations of more easing.

New U.S. claims for unemployment benefits edged down last week, holding near four-year lows, according to a government report on Thursday that suggested the labor market was gaining momentum..

The dollar was little changed against the yen at 81.20 yen. However, it remains close to a nine-month high touched on Monday as the yen remains under pressure after Bank of Japan easing measures.

UBS strategists said that they expected the Fed to normalize rates much earlier than the Bank of Japan, a policy divergence that should lead to a widening of two-year Treasuries and Japanese government bond yield gap.

The yield gap has a tight correlation with the dollar/yen pair and a widening should see the dollar drift higher. As such, UBS expects the dollar to rise to 85 yen by 2012 and 90 yen by 2013 and repatriation flows ahead of the Japanese financial year end in March is unlikely to be yen supportive.

The Australian dollar rose 0.2 percent to $1.0757, helped by robust Chinese PMI data, though it was well below a seven-month peak touched on Wednesday.

Additional reporting by Lucian Lopez in New YorkReporting By Nick Olivari; Editing by Theodore d'Afflisio

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