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 Stock and currency markets were taking a breather after one of the
most volatile and event-filled weeks in more than a year, but there
is plenty of data and policymaker comment spread through this week
for investors to get their teeth into.
Top of the agenda for the euro is European Central Bank President
Mario Draghi's appearance in the European parliament, which follows
a lukewarm take-up for the bank's latest scheme to push more money
through the financial system.
If purchasing managers surveys on Tuesday point to more weakness in
the euro zone economy, it will fuel speculation that Draghi will be
forced to embark on the sort of outright money-printing to which
U.S. policymakers have just called a halt.
"The dollar is now on a pretty strong footing, although after last
week's action we could be in for a bit of a lull," said Derek
Halpenny, European Head of Global Market Research at Bank of Tokyo
Mitsubishi-UFJ in London.
"We have a handful of Fed speakers and Draghi to go on, but I'm not
sure any of that will be enough to push us much further this week."
BTM have the euro at $1.27 by the end of this year then falling to
$1.20 next, underpinned by a widening gap in U.S. and European
market interest rates that reflect expectations the Federal Reserve
will raise borrowing costs next year.
"We're quite happy with that fairly conservative end of year
forecast because there is quite a lot priced into the dollar
already," Halpenny said.
The euro traded just over 0.2 percent higher on the day at $1.2860 <EUR=>
after touching a 14-month trough of $1.2826.
The dollar index, a gauge of the greenback's strength against a
basket of major currencies, was down 0.15 percent 84.611 <.DXY> in
early trade in Europe, just off a two-year high of 84.797 hit
Friday.
GROWTH DEMANDS
While sterling was around 0.4 percent higher at $1.6348, it has made
little headway since Friday's Scottish referendum result. Major
political risks - including the fallout from Scotland's vote to
reject independence and next May's general election in the United
Kingdom - still lie ahead for the pound and other British assets.
The yen also eked out some lost territory after slumping to a
six-year low against the dollar late last week, although the gains
were modest.
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There was little help from a weekend meeting of G20 finance
ministers and bank chiefs in Cairns, Australia, where currencies got
little mention.
The G20 said they were close to adding an extra $2 trillion to the
global economy and creating millions of new jobs, but Europe's
extended stagnation remained a major stumbling block.
"Currency movements look to have drawn little focus at this
weekend's G20 meeting," Todd Elmer, currency strategist at CitiFX in
Singapore, said in a note to clients.
"This will likely be viewed as JPY-negative since it runs counter to
building speculation that authorities, both foreign and domestic,
are becoming more concerned with recent depreciation."
Japanese officials have stopped short of actively talking down the
dollar's gains versus the yen, though they have voiced concerns
about wide currency swings.
Finance minister Taro Aso and economy minister Akira Amari have
suggested this month that a sharp decline in the yen would be
unwelcome, preferring instead more gradual moves.
The dollar dipped 0.2 percent to 108.87 yen <JPY=> after hitting a
six-year high of 109.46 on Friday.
(Additional reporting by Shinichi Saoshiro; Editing by Catherine
Evans)
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