FOREX-Euro hits four-month low on weak German data and dollar gains

* Euro hurt by poor German data, worst week since November
* Coronavirus fears keep sentiment fragile, yen gains
* Market attention turns to U.S. non-farm payrolls
* GRAPHIC-World FX rates in 2019: http://tmsnrt.rs/2egbfVh

(Adds new analyst quotes, latest prices, chart)
By Tommy Wilkes
LONDON, Feb 7 (Reuters) - The euro fell to its lowest since
October on Friday after German industrial output recorded its
biggest decline in a decade in December and a recent batch of
strong employment data in the United States encouraged investors
to buy the dollar.
The dollar has gained in recent sessions thanks to solid
data. It has also benefited as investors shied away from riskier
currencies while assessing the fallout from the coronavirus
outbreak in China, where the death toll continues to climb.
The focus for Friday is U.S. non-farm payrolls data due at
1330 GMT which is expected to confirm that the labour market in
the world's biggest economy is in robust health.
MUFG analyst Derek Halpenny said the Germany data undermined
European Central Bank President Christine Lagarde's comments on
Thursday that the euro zone economy was stabilising. The euro fell as low as $1.0948 EUR=EBS , down 0.3% on the
day, and has now lost 1.2% since Monday, putting it on track for
its worst week since November.
"The hard data sits inconsistently with most sentiment data
pointing to some improvement. But the political line that
'recovery is coming' is losing credibility fast," Halpenny said.
"The October 2019 low of $1.0879 is now a credible near-term
target given the scale of weakness in the German data,
especially if the much-anticipated improvement in the
coronavirus outlook fails to materialise."
Falls in the offshore Chinese yuan and gains for the
Japanese yen underlined the more cautious mood setting on Friday
after a week in which stock markets and other riskier assets
rebounded sharply despite concerns about the virus and growth.
The offshore yuan slipped 0.3% to 6.997 yuan per dollar
CNH=EBS , though it was still set for a small gain this week
thanks to stimulus from China's central bank and Beijing's
announcement of tariff cuts on U.S. imports.
The Australian dollar, often seen as a proxy for China,
weakened 0.7% to $0.6672 AUD=D3 , its lowest since October,
after the Reserve Bank of Australia slashed growth forecasts in
its quarterly economic outlook. The U.S. dollar, which is on course for its biggest weekly
gain against the yen since July 2018, dropped against the
Japanese currency on Friday, trading 0.2% lower at 109.81 yen
JPY=EBS .
The dollar index, which measures the currency against a
basket of rivals, edged 0.1% higher .DXY to 98.597, its
strongest since mid-October.
Analysts said the U.S. non-farm payroll data had the
potential to boost the greenback further.
"Assuming the figures hit the forecasts, the data are likely
to be modestly bullish U.S. dollar, in my view," said Marshall
Gittler, an analyst at BDSwiss Group.
Sterling was headed for its worst week since the aftermath
of December's general election, dogged by persistent worries
about negotiations between Britain and the European Union for a
post-Brexit trade deal. The pound was last at $1.2932 GBP=D3 . It staged a small
recovery against the euro, rising 0.3% to 84.70 pence
EURGBP=D3 .

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