2013.05.0702:01:35UTC+00Euro remained lower as Europe's factories seen slowing; Yen advances

The euro holds loss versus the dollar before data forecast to show factory activity slowed in Europe’s two largest economies.

European Central Bank President Mario Draghi stated yesterday that further interest-rate trims are possible after lessening them to a record low last week. The yen bounced back from a three-day drop versus the greenback, the longest streak in more than two weeks. The Australian dollar down versus all of its 16 most-traded counterparts on prospects the central bank may cut lending costs to a record low today.

“The euro will probably continue to grind lower,” said Yuki Sakasai, a foreign-exchange strategist at Barclays Plc in New York. “President Draghi made some bold remarks about the possibility of cutting the deposit rate to zero. As Draghi noted, the economic data will be key going forward. Europe is likely to underperform the U.S.”

The euro moved a notched at $1.3075 as of 10:23 a.m. in Tokyo from yesterday, when it pulled back 0.3 percent. It slump 0.4 percent to 129.18 yen. Japan’s currency boost 0.4 percent to 98.96 per dollar, after depreciating 2 percent in the previous three sessions.

German factory orders and French industrial production both decline in March from the past month. German orders probably skid 0.5 percent, while French activity contracted 0.3 percent.

“We will be looking at all the data that arrives from the euro-area economy in the coming weeks and, if necessary, we are ready to act again,” Draghi voiced out yesterday after the ECB trim its standard rate to 0.5 percent last week. He said policy makers had an open mind on a negative deposit rate.

U.S. Jobs

The U.S. dollar was supported ahead of a May 9 data forecast to display initial unemployment claims of 335,000 in the seven days ended May 4, according to another economist poll. Claims dropped to a more than five-year low of 324,000 the week before.

The unemployment rate unexpectedly retreated to 7.5 percent and payrolls expanded by a bigger than assumed 165,000 workers last month, Labor Department data showed May 3.

“We’ll have to wait for the jobs number to see if dollar- yen will retest its highs,” said Barclays’s Sakasai. “Until then, dollar-yen will continue to be driven by moves in Treasury rates.”

The yield on 10-year U.S. Treasuries yesterday touched a three-week high of 1.77 percent and its spread with same- maturity. Japanese government bonds expanded to 119 basis points, the most since April 11. The 10-year spread for U.S. Treasuries and bonds was at 52 basis points yesterday, the widest since April 4.

RBA Decision

In Australia, traders see more than a 50 percent chance the Reserve Bank will cut its standard rate to a record 2.75 percent today, according to Bloomberg calculations based on overnight-index swap rates. By contrast, of the 29 economists surveyed by Bloomberg, 8 predict a cut.

“A number of RBA commentators have noted that while the data has not all been soft and the RBA could wait for further confirmation, a cut would help relieve pressure on the export sector,” Mark Smith, a senior economist at ANZ Bank New Zealand Ltd. in Wellington, wrote in a research note today. “In the past the Bank has also tended to act sooner than expected by market economists.”

The Aussie dollar inch down 0.1 percent to $1.0241. Yesterday it reached $1.0222, matching the lowest since April 23.