Euro fragile before ECB meeting, lends support to dollar

ECB forecast to ease monetary policy further at meeting later on Wednesday


The euro slipped on Wednesday to hover just above a near 8-month low against the dollar, as long-term investors raised their bets against the single currency before an European Central Bank meeting that is expected to ease monetary policy further.

The euro’s dip lower helped the dollar recover ground lost after data showed US manufacturing contracted in November for the first time in three years. The Federal Reserve is still expected to raise rates later this month, but the report struck a jarring note nonetheless.

“The euro has enjoyed a bit of a bounce, but going into the meeting, investors are confident that the ECB will not disappoint,” said Alvin Tan, currency strategist at Societe Generale. “Investors will also keep an eye on what (Fed chair Janet) Yellen has to say.”

The euro was down 0.1 per cent at $1.0622, with Monday’s 7-month trough of $1.0557 in sight.

The dollar index roe to 99.878, after retreating from a 8-month high of 100.310 set on Monday. The index set a 12-year peak of 100.390 in March.

The index, which tracks the dollar against a basket of rival currencies, rallied 3.3 per cent last month on expectations the Federal Reserve will raise interest rates at its December 15th policy review.

Ms Yellen has public appearances on Wednesday and Thursday at a high-profile economics group and before a joint committee of Congress. She may remind investors that while the Fed is ready to act, further increases are likely to be gradual.

Against the yen, the dollar rose to 123.08 yen, moving back toward Monday’s high of 123.34. It has been little changed against the yen since hitting a three-month high of 123.77 in mid-November.

“Japanese importers have demand for dollars, so any good figure, then 124, here we come,” said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo.