Euro heads towards 9-month lows

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The euro fell towards 9-month lows against the dollar on Tuesday, as investors positioned for a weak German sentiment survey that is likely to add to signs of a slowdown in the euro zone recovery, specifically in Germany.

The German ZEW survey for August will be released at 0900 GMT and both the current situation index and the expectations index are both forecast to have fallen, as many expect Europe's largest economy to be hit by sanctions imposed on Russia.

Russia is one of Germany's biggest trading partners and the West has imposed tough sanctions on Moscow amid the continuing conflict with Ukraine. Russia, too has responded with sanctions, all which analysts say, will hurt the euro zone more than the U.S. economy.

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"If the ZEW collapses concerns about Russia will become more intense," Commerzbank currency strategist Lutz Karpowitz said.

"That means the euro will not merely suffer as a result of a lack of momentum from other data today, but in the long run it will simply become more difficult for the euro if the European economy is unable to take off."

The euro was down 0.15 percent at $1.3664, not far from a nine-month low of $1.3333 struck on Aug. 6. It was also lower against the yen at 136.70 yen, eyeing a recent trough of 135.73 yen.

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The euro's losses saw the dollar edge up. The index rose 0.1 percent to 81.559 with the dollar making gains against the yen and the Swiss franc, too.

The safe-haven yen stayed off highs notched up late last week when concerns about the situation in the Middle East and the conflict between Ukraine and Russia were more acute. The dollar bought 102.25 yen, adding about 0.1 percent and pulling away from Friday's two-week low of 101.51 yen.

"Demand for dollars seems to be higher than some people expected, around 102," said Kaneo Ogino, director at Global-info Co. in Tokyo, a foreign exchange research firm.

Trading was quiet in Tokyo, however, with many people away from work for the Obon season to commemorate ancestors.

Among the biggest movers was the New Zealand dollar which fell to a two-month low against its U.S. counterpart. It dropped to $0.8407, down 0.5 percent on the day, and its lowest since June 4 when it fell to $0.8401.

That was a long way off a near three-year high of $0.8839 hit last month, with the currency dogged by expectations of a slowdown in the pace of New Zealand interest rate rises and an ongoing tumble in global dairy prices.

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Fresh evidence that the housing market there was cooling was also adding to selling pressure, traders said.

"The New Zealand dollar is now reaching the key $0.84 level. A break below this level would confirm a technically bearish "double-top" formation suggesting a move below $0.80," Morgan Stanley said in a morning note.