Yen Reverses Losses After Mixed Signals From Japan

Yen Reverses Losses After Mixed Signals From Japan

The ZEW index rose to its highest since April 2010, beating even the highest forecast in a Reuters poll.

The euro moved further away from a three-week low of $ 1.3306 hit on Friday, with traders reporting bids at $ 1.3310-15.

Investors, however, grew cautious ahead of Italian elections this weekend, which should cap any euro rally.

“The euro has derived no obvious benefit from the better German data,” said Bob Lynch, chief currency strategist at HSBC in New York. He cited several bearish technical indicators on euro/dollar, such as the five-day moving average close to crossing the 40-day moving average.

(Read More: Aussie Dollar at $ 1.30: Are You Kidding?)

All those indicators suggest more downside than upside risk for the euro against the dollar, Lynch said, and he would look to sell toward the $ 1.3400 area.

Europe’s shared currency also rose sharply against sterling, gaining 0.6 percent to 86.78 pence on growing speculation that Britain could lose its triple-A credit rating.

The euro has come under selling pressure in the wake of recent data revealing a deeper-than-forecast euro zone recession and on concerns that Italy’s Feb. 24-25 election could fragment parliament, potentially hampering the country’s reform efforts.

The dollar index, meanwhile, last slipped to 80.49, down 0.2 percent, still within striking distance of the 80.727 six-week high hit on Monday.

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