March 1, 2012 / 5:01 PM / 5 years ago

FOREX-Euro little changed after falling to one-week low

 * Euro last little changed in volatile trade
 * Euro falls to one-week low after U.S. consumption data
 * U.S. ISM also weighs on risk tolerance
 * Bernanke gives no QE hint

 (Updates prices, adds quotes and details)	
 NEW YORK, March 1 (Reuters) - The euro was little
changed in volatile trading on Thursday after falling
to a one-week low on U.S. economic data which had  reignited
doubt about the strength of the recovery.	
 Real personal consumption in January was unchanged from the
prior month, making it the third month in a row it was flat.
. A separate report showing the pace of growth in
the U.S. manufacturing sector unexpectedly slowed in February,
added to risk aversion and weighed on the euro. 
 	
 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. 	
 Testimony from Federal Reserve Chairman Ben Bernanke to a
Senate panel after testimony to Congress on Wednesday was
closely watched but in the final analysis had minimal impact.   	
 "The manufacturing ISM (was) more important and it should
keep the pressure on the euro today," said Joseph Trevisani,
chief market strategist at Worldwide Markets in Woodcliff Lake,
New Jersey.	
 The euro was little changed at $1.3324 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 earlier
said a fall below that level could push it toward $1.32. The
session peak posted at $1.3356 in early trading. 	
 The euro is now down more than a cent from 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. 	
 Repeating Wednesday's prepared remarks, the Fed chairman
cautioned that the recent steep drop in the U.S. unemployment
rate was unlikely to continue given a still soft economy, but he
stopped short of signaling a further easing of monetary policy. 	
 "The market is starting to realize that QE3 is off the table
though Bernanke still has a cautious tone," said David Song,
currency analyst at DailyFX. "Bernanke is a little more dovish
than yesterday, highlighting concerns about fiscal
responsibility and that the debt situation is unsustainable." 	
 	
 EU SUMMIT	
 Attention on Thursday also turned to a European Union summit
and a meeting of euro zone finance ministers amid discussion of 
Greece's progress on meeting the terms of its latest 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 funds eased banking and
sovereign debt strains. They still expect the euro to decline
sharply by the end of the year, however, though they 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.	
	
 YEN GAINS	
 The dollar fell 0.2 percent against the yen to 81.09
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 the gap between two-year
Treasuries and Japanese government bond yields.	
 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 are unlikely to be yen supportive.	
 The Australian dollar rose 0.7 percent to $1.0802,
helped by robust Chinese PMI data, though it was well below a
seven-month peak touched on Wednesday.	
	
 (Reporting by Nick Olivari; Editing by James Dalgleish)	
 	
 

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