WORLD FOREX: Euro Hits 5-Month Low Vs Dollar On China Data

TOKYO (Dow Jones)--The euro fell to a fresh five-month low against the dollar in Asia Thursday after China's strong economic data heightened speculation Beijing may take further steps to cool its economy, possibly weighing on global equities, commodities and other risk-sensitive assets like the common currency.

Short-term players sold the euro after data showed China's gross domestic product expanded 8.7% in 2009, beating market expectations for 8.5% growth. Separate data showed the country's consumer price index was up 1.9% from a year earlier in December, exceeding expectations for a 1.7% rise and underscoring inflation concerns.

The selling drove the euro down to $1.4067, its lowest level since August 17 last year. Concern that Chinese authorities may take the most recent data as a cue to tighten monetary policy further could continue to weigh on the euro and other commodity-linked currencies like the Australian dollar, dealers said. Thursday's indicators came a day after China's banking regulator said it will rein in new lending this year.

"The China data were strong, so people are now even more anxious over when the authorities might again try to apply the brakes on the economy," said Yasuo Nakayama, manager at Shinkin Central Bank. The figures "put even more downward pressure on the euro," Nakayama added.

At 0450 GMT, the euro stood at $1.4093, below its level late Wednesday in New York at $1.4102. Due to euro's fall, the ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies including the common currency, was up at 78.445 compared to 78.369.

The Chinese currency itself provided news to market players.

Japan's Ministry of Finance issued a formal denial Thursday after media reports said that Finance Minister Naoto Kan had asked his Canadian counterpart Jim Flaherty to raise the issue of China's currency at an upcoming Group of Seven meeting.

Players are now focused on more U.S. corporate earnings statements, dealers said.

"If there are any negative surprises, share markets could head down, and in such a case the euro could easily fall below $1.4000," said Hiroshi Maeba, executive director of foreign exchange trading at Nomura Securities.

Meanwhile, the dollar rose against the yen due to buying by short-term players in Asia. Mild rises in the morning session triggered stop-loss buying orders at Y91.50, sending the unit to an intraday high of Y91.67. At 0450 GMT, it traded hands at Y91.57.

The dollar's rise helped the euro erase earlier losses against the yen on the China data. After touching a low of Y128.52 in the morning session, the common currency stood at Y129.10 compared to Y128.69 late Wednesday in New York.