(Recasts, adds comments, changes byline and dateline, previous
LONDON)
By Vivianne Rodrigues
NEW YORK, April 23 (Reuters) - The euro retreated from a
record versus the dollar on Wednesday after a fall in
manufacturing activity suggested that economic growth in the
euro zone is starting to slow.
Demand for the European currency also fell after comments
by European Central Bank Governing Council member Christian
Noyer dampened speculation of further rate increases by the
bank.
The RBC/NTC Eurozone Purchasing Managers Index for
manufacturing dropped to 50.8 in April, its lowest in nearly
three years. German manufacturing activity also fell, although
both German and euro zone readings for the service economy
rose.
"The market may have gotten ahead of itself betting on a
rate hike by the ECB," said Omer Esiner, a market strategist at
Ruesch International in Washington. "The truth is that today's
economic data out of Europe was pretty disappointing and Noyer
backed off from his hawkish comments. Naturally, the euro is
retreating."
In morning trading in New York, the euro was down 0.3
percent at $1.5932 <EUR=>, off the record peak of $1.6019 set
the previous session according to Reuters data. It traded lower
at 164.18 yen <EURJPY=>.
"Manufacturing has dropped quite a bit and that has been
the driver of growth in Germany ... the euro is off a touch on
it," said David Pais, currency strategist at Citigroup. "We're
a considerable way away from an ECB rate rise. I can't see it
happening, to be honest."
The U.S. currency was up 0.2 percent at 103.15 yen <JPY=>.
The euro hovered in reach of a record high versus the UK
currency after a slide in British mortgage approvals to a
record low in March underlined serious weakness in the housing
market. It last traded at 80.39 <EURGBP=>.
The data suggested that the Bank of England may continue
cutting rates, and wiped out initial sterling gains made on BoE
minutes showing there was dissent within the central bank over
its decision to cut interest rates by 25 basis points to 5.0
percent this month.
NOYER COMMENTS
The ECB is expected to keep its key interest rate on hold
at 4.0 percent, while the U.S. Federal Reserve is expected to
lower its benchmark from 2.25 percent later this month.
The euro hit a record high above $1.60 on Tuesday, boosted
by hawkish remarks from ECB officials, including Governing
Council member Noyer's comments in an interview with French
radio network RTL that the bank will do what is needed to being
inflation back to target.
But Noyer later said markets had misinterpreted his remarks
as a hint on the direction in which interest rates might move,
the Wall Street Journal reported in its online edition.
"I would never engage in a discussion about the future path
of interest rates, simply because nobody knows. It would be
dangerous to make predictions in either direction," the WSJ
quoted Noyer as saying.
"The market is giving some credibility to Noyer backing off
hawkish comments. It seems there's more sensitivity to interest
rates," said Adam Cole, global head of currency strategy at RBC
Capital Markets.
The euro is up more than 9 percent this year and its breach
of $1.60 prompted chairman of the Eurogroup of finance
ministers Jean-Claude Juncker to say the exchange rate is
excessively volatile, which also prompted a slight dip in the
currency.
But others were less concerned about euro strength, with
German Finance Minister Peer Steinbrueck saying that its high
value was having positive effects on import prices.
(Additional reporting by Naomi Tajitsu in London; Editing by
Andrea Ricci)
