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FOREX-Yen struggles, euro subdued ahead of inflation data

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* Yen wallows at one-week lows vs USD euro, hits 6-year
lows on NZD

* Hopes of China stimulus keeping risk demand buoyant

* Euro seen subdued ahead of euro zone inflation data

* China PMI on Tuesday also in focus

By Ian Chua

SYDNEY, March 31 (Reuters) – The yen stayed on the defensive
early on Monday, reaching a fresh six-year low on the New
Zealand dollar as demand for the safe-haven currency waned amid
hopes of more stimulus from China.

The dollar traded at 102.87 yen, not far from
Friday’s one-week peak of 102.98, while the euro briefly touched
a one-week high of 141.74. The kiwi rose as far as
89.23 yen, a level not seen since November 2007.

Traders said China’s official manufacturing PMI survey due
on Tuesday will be closely watched after a recent string of
disappointing data pointed to a slowdown in the world’s second
biggest economy.

“We expect a decline to 49.8 in March from 50.2 in February,
falling below 50 for the first time in 17 months, as growth
momentum continues to fade. This should further heighten the
urgency to ease policy,” analysts at Nomura wrote in a note to
clients.

Investors will also be keeping a close eye on euro zone
inflation figures due later on Monday after data late last week
showed a key measure of German inflation unexpectedly slowed in
March.

The soft reading raises the downside risk for euro zone
inflation, which is set to stay in what European Central Bank
(ECB) President Mario Draghi has called the “danger zone” of
below 1 percent for a sixth month.

Yet, Bundesbank President Jens Weidmann on Saturday said the
ECB should not over-react to the slowdown in inflation as it was
caused largely by temporary cyclical factors.

In any case, traders said a weak number will no doubt put
the ECB under more pressure to act and that would be negative
for the euro.

The common currency last traded at $1.3747, having
plumbed a one-month low of $1.3704 on Friday.

In contrast, commodity currencies such as the Australian and
New Zealand dollars have been riding high on prospects of more
stimulus from China.

The Aussie scaled a four-month peak just shy of 93 U.S.
cents last Friday, while its Antipodean counterpart hit
a 2-1/2 year high near 87 U.S. cents.

The kiwi, further supported by the likelihood of more
interest rate hikes at home, appeared on track to retest its
post-float peak of $0.8842 set in late 2011.

(Editing by Bernard Orr)

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