steady after ECB keeps rates unchanged, eyes on Draghi
Send a link to a friend
[October 02, 2014]
By Jemima Kelly
LONDON (Reuters) - The euro retained its
small gains against the dollar on Thursday but remained near a two-year
low after the European Central Bank kept interest rates unchanged at
historic lows as expected.
Investors are now awaiting a news conference at 1230 GMT (0830
EDT) at which the bank's President Mario Draghi is expected to give
further details of the ECB's plan to buy asset-backed securities
(ABS) and covered bonds.
The bond purchase program was announced in September as part of
measures the bank hopes will boost the flagging euro zone economy
and ward off the growing threat of deflation.
The euro was up 0.1 percent on the day at $1.2634 <EUR=>, about 50
pips off its two-year low of $1.2572, hit on Tuesday.
"My guess is that the euro can still rise," said Adam Myers,
European head of currency strategy at Credit Agricole in London.
"Whilst there has been a clearout of dollar positions overnight,
there are still a lot of investors who are still very long on the
Many in the markets are expecting Draghi to give a size for the ABS
purchase program during his news conference, although some traders
cited reported comments by ECB Vice President Vitor Constancio
suggesting a precise figure would not be forthcoming.
"Everyone is positioned for further details, and the market could be
disappointed if there isn't a figure," Morgan Stanley's head of
European currency strategy Ian Stannard said.
"That could lead to a post-ECB rebound for the euro if there are no
further measures, ... such as an extension into other asset classes,
A Reuters poll on Monday showed money market traders on average
expect the ECB to buy a total of 200 billion euros of ABS and
covered bonds over a year.
Expectations the ECB will be forced to buy sovereign bonds as part
of a broad-based quantitative easing scheme have risen in recent
months as the 18-nation bloc tips toward deflation.
Rabobank puts the chances of QE "well beyond the 50 percent mark"
although BlackRock's head of European and global bonds said on
Wednesday that investors loading up on riskier euro zone government
bonds in anticipation of QE were making a mistake.
[to top of second column]
The dollar earlier hit a nine-day low of 108.33 yen after weak
global manufacturing data and a U.S. Ebola health scare sent
investors in search of safer assets. The greenback was last trading
at 108.80 yen, down 0.1 percent on the day.
The dollar index fell about 0.2 percent to 85.821, pulling away from
a four-year high of 86.218 touched on Tuesday as investors took
profits after the greenback's recent rally. The index has notched up
a record-breaking 11 straight weeks of gains and posted the best
quarterly rise in six years.
"Some investors, including some hedge funds, are using this as an
opportunity to take profits" after the dollar's rally against the
yen, said Kaneo Ogino, director at Global-info Co in Tokyo, a
foreign exchange research firm.
Traders are expected to remain cautious ahead of the closely watched
U.S. payrolls report on Friday, and are also warily monitoring
developments in Hong Kong's ongoing pro-democracy protests.
(Additional reporting by Lisa Twaronite and Ian Chua in Sydney;
Editing by Catherine Evans)
[© 2014 Thomson Reuters. All rights
Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.