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The dollar rose to a near eight-week high against the euro on Friday as lukewarm European PMI data added to the broader market conviction that European central bank policymakers will maintain a loose monetary policy for the near future.

Eurozone business activity remained lackluster with the IHS Markit's EuroZone Composite Flash Purchasing Managers' Index (PMI), seen as a good gauge of economic health, holding at 50.9 in January but missing the median prediction in a Reuters poll for 51.2. That followed an earlier PMI from Germany, Europe's largest economy, which showed the private sector gained momentum.

The euro was 0.21% lower against the greenback at $1.1029. "The move partly reflected a phase of broader euro weakness following the release of the flash Eurozone January PMI data showing a miss in the composite headline, at 50.9, despite a firm German reading," Jonathan Coughtrey, managing director, at Action Economics said in a note.

The survey data comes a day after the European Central Bank did not make any policy change, standing by its pledge to keep buying bonds and, if needed, cut interest rates until euro zone inflation headed back to its goal. Friday's data added to expectations that a rate hike is ruled out for the rest of the year, with Nordea analysts expecting a 10-basis-point increase only in the second quarter of 2023.

The euro is set for its worst start to the year in five years, down 1.5% so far this month, and trading at its lowest levels since December 2. The dollar erased gains against the Japanese yen to trade down 0.15% after the release of January services and manufacturing PMIs from Markit showed the US manufacturing sector continuing to face pressure. The pound was 0.3% lower against the greenback.

Copyright Reuters, 2020

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