FOREX-Euro edges lower on economic pessimism, Aussie hit by rate outlook

Reuters

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    * Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
    * Tracking the coronavirus https://tmsnrt.rs/3aIRuz7
    * Euro draws fire as focus shifts to economic outlook
    * Pound slips on worries about relations with EU
    * Virus still a worry as traders try to measure impact

    By Stanley White
    TOKYO, Feb 18 (Reuters) - The euro fell towards a three-year
low versus the dollar ahead of a highly watched German survey on
Tuesday, which is expected to show a sharp slump in investor
confidence and fuel growing pessimism about the outlook for
Europe's largest economy.
    Financial markets clung to tight ranges following a U.S.
public holiday on Monday, shifting the investor focus to
European news and developments in the coronavirus crisis.
    Among Asian currencies, the Australian dollar slipped below
the 67 U.S. cent level after minutes from the central bank's
last meeting revived the prospect of policy easing while the
Chinese yuan was weighed by worries about the economic impact of
the coronavirus.
    Sentiment for the euro has worsened dramatically this month
after weak manufacturing and gross domestic product data from
Germany, Europe's largest economy, suggested that the euro zone
is more vulnerable to external shocks that previously thought.
    "The euro is close to testing an important support level at
$1.08 due to the diverging economic outlook between the euro
zone and the United States," said Junichi Ishikawa, senior
foreign exchange strategist at IG Securities in Tokyo.
    "It looks a little oversold, so in the very short-term there
could be a bounce, but the euro's fundamentals still point more
to the downside."
    The euro  EUR=EBS  fell 0.12% to $1.0827 in Asia, close to
its lowest since April 2017.
    Since the start of February, the single currency has lost
2.4% versus the greenback as disappointing economic data raised
concerns that euro zone monetary policy will have to remain
accommodative for much longer.
    The euro's next hurdle is the release of Germany's ZEW
survey later on Tuesday, which is forecast to show economic
sentiment slipped from the highest since July 2015.
    Sterling also nursed losses against the dollar and the euro
due to worries about economic ties between Britain and the
European Union as both sides laid out conflicting views on how
to proceed with trade negotiations.
    The pound  GBP=D3  held steady at $1.2998 in Asia on Tuesday
following a 0.3% decline in the previous session. Sterling
 EURGBP=D3  was quoted at 83.33 pence per euro, nursing a 0.4%
decline on Monday.
    Prime Minister Boris Johnson's Europe adviser David Frost
said on Monday Britain would not be threatened into following EU
rules to win a free trade agreement with the bloc.  urn:newsml:reuters.com:*:nL8N2AH4IE
    Frost's comments contrast with those of European Commission
President Ursula von der Leyen, who has called on Britain to
guarantee fair competition based on ambitious environmental and
labour standards.  urn:newsml:reuters.com:*:nL8N2AB240
    Britain left the EU last month and the two sides will now
start negotiating a new relationship from trade to security.
    The onshore yuan  CNY=CFXS  was a tad lower at 6.9859 versus
the dollar, unsettled by a decline in Chinese shares after Apple
Inc  AAPL.O  said it will not meet sales targets because the
virus epidemic has slowed production and demand in China.
 urn:newsml:reuters.com:*:nL1N2AH0QL
    China's Hubei province, considered the epicentre of the
coronavirus outbreak, said new cases of the illness fell
slightly to 1,807 on Monday from 1,933 the previous day.
 urn:newsml:reuters.com:*:nL4N2AH3XQ
    Currency traders are cautiously monitoring new data on the
virus given uncertainty about the actual number of cases and
difficulties in estimating when the epidemic will peak.
    The yen  JPY=EBS , which initially gained on safe-haven
flows as the outbreak unfolded last month, held steady in a
narrow range at 109.74 per dollar.
    The Australian dollar  AUD=D3  fell 0.39% to $0.6690 after
minutes from the Reserve Bank of Australia's first meeting of
the year showed policymakers discussed easing policy.
    The RBA kept rates unchanged at an all-time low of 0.75% at
that meeting, but the minutes showed central bankers are
prepared to ease policy further if needed.  urn:newsml:reuters.com:*:nRUAHDEG7R 
    The New Zealand dollar  NZD=D3  also fell 0.4% to $0.6411.
    The antipodean currencies have been buffeted by the virus
due to Australia's and New Zealand's extensive trade ties with
China, with commodities, tourism and education especially
vulnerable.

 (Reporting by Stanley White; Editing by Sam Holmes)
 ((stanley.white@tr.com; +81 (0)3 4563 2799;
twitter.com/stanleywhite1 ;))

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