Euro drops against dollar after bleak German investor survey

• The euro traded down 0.1pc at $1.0830, close to its lowest since April 2017.
• The Australian dollar fell 0.5pc to 0.6674 against the U.S. dollar, an eight-day low.
• The Aussie has also been buffeted by the coronavirus because of Australia's extensive trade ties with China.

LONDON: The euro weakened on Tuesday, close to the three-year low it touched on Monday, after a German survey showed a slump in investor confidence, adding to pessimism about the outlook for Europe's largest economy.

The euro has lost 3.4pc of its value against the U.S. dollar so far this year, as weak manufacturing and gross domestic product data from Germany suggest the euro zone is more vulnerable than previously thought, while the U.S. economy has proved more resilient than the rest of the world.

The euro traded down 0.1pc at $1.0830, close to its lowest since April 2017.

The mood among German investors deteriorated far more than expected in February on worries the coronavirus outbreak that started in China would dampen world trade, the ZEW research institute said in its monthly survey showing economic sentiment among investors.

"Breaking the EUR/USD 1.0800 level seems to be a question of when rather than if," said Petr Krpata, chief currency strategist at ING.

"The mix of soft euro zone data, the market pricing renewed ECB deposit rate cuts and attractive euro funding characteristics do not bode well" for the euro.

Poor economic data in the euro area has raised concerns euro zone monetary policy will have to remain looser for longer.

Minutes from the Reserve Bank of Australia's (RBA) first meeting of the year similarly fuelled expectations of lower interest rates.

The RBA left rates at a record low of 0.75pc at that meeting, but the minutes showed it was prepared to ease policy further if needed.

The Australian dollar fell 0.5pc to 0.6674 against the U.S. dollar, an eight-day low.

The Aussie has also been buffeted by the coronavirus because of Australia's extensive trade ties with China.

"If it weren't for the virus, the incredibly cheap Aussie dollar would be definitely worth buying," said Marc-André Fongern, head of FX research at Fongern Global Forex.

"However, investors should exercise patience as the Australian economy looks set to face further downward pressure."

China's yuan - the most vulnerable currency to the spread of the coronavirus - fell 0.3pc to an eight-day low of 7.0110 against the dollar in the offshore market.

China is racing to contain job losses as the virus batters its economy.

Norway's crown plunged to a 19-year low of 9.3365 against the U.S. dollar.

The British pound remained under pressure as Britain and the European Union laid out conflicting views on how to proceed with trade negotiations.

The currency was last up 0.2pc at $1.3031.

Elsewhere, the Japanese yen rose to a five-day high of 109.66 against the U.S. dollar on the back of the coronavirus outbreak.

A study showed that almost twice as many Chinese medical workers have been infected by coronavirus as officially reported by the government.