Euro on backfoot after report of dovish ECB views, China data awaited

After slipping about 0.2 per cent overnight, the euro is virtually unchanged against the US dollar.  — Reuters pic
After slipping about 0.2 per cent overnight, the euro is virtually unchanged against the US dollar. — Reuters pic

TOKYO, April 17 — The euro sagged early today following a report that some European Central Bank policymakers have expressed dovish views, with the market awaiting Chinese economic data for further cues.

The euro was little changed at US$1.1284 after slipping about 0.2 per cent overnight to pull away from a 2-1/2-week high of US$1.1324 scaled on April 12.

The single currency came under pressure after Reuters quoted four sources with direct knowledge of discussions that several European Central Bank policymakers think the ECB's economic projections are too optimistic as economic weakness in China and trade tensions linger.

“It remains to be seen whether the ECB policymakers wanted to check the euro's recent advance. But the macro environment is not conducive for the euro to keep appreciating when the euro zone economy still remains shaky,” said Shin Kadota, senior strategist at Barclays in Tokyo.

The US dollar index against a basket of six major currencies was steady at 97.073 after gaining 0.1 per cent overnight thanks to the flagging euro.

A bounce in long-term US Treasury yields to a four-week high in the wake of equity gains on Wall Street also supported the greenback.

The market's immediate focus was on a batch of Chinese data due at 0200 GMT, for a glimpse of how the world's second largest economy performed in the first quarter.

Economic growth is expected to have slowed to its weakest pace in at least 27 years in the first quarter, as policymakers seek to head off a sharper slowdown that could stoke job losses.

The New Zealand dollar was down 0.8 per cent at US$0.6706 after falling to US$0.6668, its lowest since January 3.

The kiwi was hit after data showed New Zealand's annual inflation slowed in the first quarter and raised odds of an interest rate cut in the coming months.

The Australian dollar was down 0.15 percent at US$0.7166 . The antipodean currency is sensitive to the economic fortunes of China, Australia's major trading partner.

“Chinese data will definitely impact the Australian dollar. But we have to remember that the currency also has key domestic factors to contend with recently,” Kadota at Barclays said.

The Aussie took a brief hit yesterday after the Reserve Bank of Australia said it believes a cut in interest rates would be “appropriate” should inflation stay low and unemployment trend higher.

The US dollar moved out of its recent range and popped up to 112.17 yen, its highest since December 20, following the bounce in US yields. — Reuters

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