LONDON: Italy's credit rating downgrade was just the latest reason not to invest in the euro, which looks certain to head lower against the dollar.

Friday's one-notch rating cut to BBB-plus by Fitch reflected the uncertainty that followed Italy's inconclusive election last month and was yet another reminder that the euro zone crisis is far from over.

The fact Fitch left Italy's rating on negative outlook raises the risk that its next move will be a further downgrade. That is hardly going to set the pulses racing of potential investors in the euro, which fell immediately after the cut and held at around $ 1.30 on Monday.

The single currency had already fallen against the dollar after Friday's US non-farm payroll data showed 236,000 jobs were created in February and that the unemployment rate hit a four-year low of 7.7 percent. This forecast-beating performance contrasts starkly with the picture in the austerity-mired euro zone, where the jobless rate rose to 11.9 percent in January from December's 11.8 percent,

While the data from the EU's statistics office showed unemployment levels stayed high in the so-called periphery economies (Spain 26.2 percent, Portugal 17.6 percent), the malaise goes wider. France's jobless rate rose to 10.6 percent in the last three months of 2012, its highest since the second quarter of 1999.

If that were not enough, a natural source of demand for euros may be slowing. Signs of a falling pace in the expansion of Asian central banks' foreign exchange reserves should mean they have less need to buy euros to ensure holdings are benchmark diversified.

Hong Kong's official foreign currency reserve assets stood at $ 304.8 billion at end-February, the Hong Kong Monetary Authority said on Thursday, up a mere 0.03 percent from $ 304.7 billion at the end of January.

Hong Kong's reserves rose 1.2 percent and 3.96 percent in January and December respectively.

Taiwan's foreign exchange reserves fell 0.6 percent at end-February to $ 404.08 billion from $ 406.557 billion at end-January.

Not good news for banks' sovereign client sales desks or for the euro.

Jin Zhongxia, head of the research institute of the People’s Bank of China, which has reserves of $ 3.3 trillion, commented in a personal capacity last month that the euro zone's financial crisis had demonstrated the euro’s structural weakness.

The dollar would remain the world's dominant reserve currency and was likely to strengthen over time, he said in an article for the Official Monetary and Financial Institutions Forum.

The euro looks forlorn and may gravitate lower against the dollar to test its 200-day moving average currently at $ 1.2859.

— Neal Kimberley is an FX market analyst for Reuters. The opinions expressed are his own.