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 The common currency fell as low as $1.1026, its lowest since
September 2003, and the region's stock and periphery bond markets
gained as hopes for the ECB's policy meeting in Cyprus lifted
investors' spirits.
The slide in the euro came as the dollar continued to rise on
expectations the U.S. Federal Reserve is heading for its first rate
increase in almost a decade this year.
For the last six weeks, the ECB has been working on how the
quantitative easing plan it sketched out in January will work, amid
lingering resistance from countries such as Germany and technical
issues that need ironing out.
"We want to know all the details that put the meat on the bones of
how they are actually going to do it," said Neil Murray, head of
pan-European fixed income at Aberdeen Asset Management.
"Are they going to do it as any auction... will they look at the
full German curve but only out to five years on BBB-rated countries,
or will they be happy to look at 10-years on all countries until
they can't buy anymore?"
Euro zone borrowing costs held around record lows as traders took
positions before the ECB's 8.30 a.m. ET post-meeting news
conference.
As has been the case for a number of months now, investors were
effectively paying to lend money not only to Germany's government
but also to Finland, Belgium, Austria, France and the Netherlands.
German two-year yields were nudging minus 0.20 percent. That is in
line with the ECB's deposit rate. Markets are questioning whether
the bond-buying scheme would include assets that yield anything less
than that, which would leave the ECB facing large losses.
EASY RIDING
Wall Street was expected to start higher after falling for the last
two days. Jobless claims will be in focus before Friday's non-farm
payrolls report, which will feed the debate on how likely the Fed is
to start raising interest rates this year.
The rising dollar was weighing on emerging markets, which use
increasingly expensive dollar debt to help fund themselves.
As EM currencies continued to weaken against the dollar, MSCI's
benchmark EM stock index fell for its fifth straight day, its worst
run since mid December.
Thai, Malaysian and Chinese stocks all posted losses in Asia, to
offsetting small gains for the Nikkei in Tokyo and South
Korea's Kospi.
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Also adding pressure was the prospect of an economic slowdown in
China. Beijing announced a 7 percent growth target for the year and
signaled that the lowest rate of expansion for a quarter of a
century is the "new normal".
The ECB will also provide new euro zone economic forecasts later
that are set to see their first upgrade of growth expectations for a
long time. It is also expected to maintain its ban on the use of
Greek bonds as collateral for its ultra-cheap funding.
As well as the ECB, 20 other central banks around the world have
either cut interest rates or eased monetary policy in some form so
far this year.
With the U.S. Federal Reserve one of the few going in the other
direction, the dollar climbed to an 11-year high against a basket of
major currencies as 10-year Treasury yields tickled two-week highs
at 2.144.
In commodities, U.S. crude oil added to overnight gains, rising 0.65
percent to $51.86 a barrel. Brent gained 0.7 percent to $61 a barrel
as investors brushed aside U.S. inventories data to focus on
tensions in Iraq and Libya.
Deteriorating security led Libya's state oil company to declare
force majeure on 11 of its oilfields on Wednesday. In Iraq, Islamic
State militants set fire to oil wells near Tikrit.
The rise in crude helped Russian stock markets gain.
"It seems to be that the market does seem to be paying a little bit
of attention to geopolitical factors," said Virendra Chauhan, oil
analyst at Energy Aspects.
(Reporting by Marc Jones; Editing by Larry King)
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