Euro fell to a three-week low against the yen during European trading session, just a short time ahead of the European Central Bank meeting. Against the broadly stronger dollar, euro fell two a two week low.
A string of disappointing economic data for the euro zone coupled with a stronger dollar after the Federal Reserve signalled it may refrain from more quantitative easing on Tuesday, accelerated the single currency decline.
Euro-zone business activity contracted in March, as shown by the Markit survey. The euro zone composite purchasing managers’ index dropped to 49.1 in March from 49.3 in February.
Meanwhile separate data on the region’s retail sales showed a decline in volume by 0.1 percent in February from January. On a yearly basis, sales had fallen 2.1 percent compared to February 2011.
The data add to the risk of a double-dip recession in Europe. Adding to concern is the Spanish debt burden. Spain held a bond auction today whose results showed borrowing costs rise and demand weaken. This suggests that investors remain very cautious towards Spanish bonds at the moment.
EURUSD fell to a low of 1.3158 by 11:00 GMT and EURJPY fell to 108.16.
The focus turns to the ECB policy meeting at 11:45 GMT today. The central bank is expected to keep the key interest rate unchanged at 1.0 percent.