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 In the clearest signal yet that he was unhappy with the direction of
the currency, ECB President Mario Draghi on Saturday told a news
conference that "a further strengthening of the exchange rate would
require further stimulus.
ECB policy member Christian Noyer hammered home the message on
Monday saying: "The stronger the euro is, the more accommodative
policy is needed".
Investors took heed in early Asian dealings, sending the common
currency down broadly.
It slipped as far as $1.3830 from $1.3885 late in New York on
Friday, pulling further away from a 2-1/2 year peak of $1.3967
scaled last month. The euro was last at $1.3847.
The common currency slid to 140.51 yen from levels above 141.00 and
reached near one-month lows against the Swiss franc at 1.2147
francs.
Further weighing on the euro, Ukraine gave pro-Russian separatists a
Monday morning deadline to disarm or face a "full-scale
anti-terrorist operation" by its armed forces, raising the risk of a
military confrontation with Moscow.
"Draghi and the situation in Ukraine are going to keep the euro
heavy," said Greg Gibbs, strategist at RBS in Singapore.
"But the reaction is pretty muted given the strength of Draghi's
comments on the weekend."
Gibbs said while the market thinks further ECB stimulus is
inevitable, other factors such as solid demand for peripheral euro
zone debt were underpinning the euro for now.
The latest setback in the common currency helped lift the dollar
index <.DXY>, pushing it further away from a three-week trough
plumbed last Thursday. The index was last up 0.2 percent at 79.612.
Against the yen, the dollar was a touch softer at 101.50 yen, having
dropped 1.6 percent last week.
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Traders expect the safe-haven yen to stay in favour given current
jitters surrounding the selloff in technology stocks.
On Friday, the Nasdaq <.IXIC> closed below the 4,000 mark for the
first time since February as investors turned sour on biotech and
momentum stocks.
Commodity currencies, usually sold off in times of market stress,
appeared to be holding up quite well so far. The Australian dollar
last traded at $0.9386, having last week peaked at a five-month high
of $0.9461.
Key this week for the Aussie and risk appetite in general is a batch
of Chinese data due on Wednesday including industrial output, retail
sales and growth data.
Further signs of weakness in the world's second-biggest economy
could hit sentiment given recent commentary suggested Beijing was
not keen on any large scale stimulus even in the face of slower
growth.
(Editing by Richard Pullin)
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