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 With European stock markets recovering and oil prices stabilising
after a dizzying sell-off on Wednesday, the safe- haven yen
retreated from overnight highs against the dollar. <JPY=EBS>
Major currencies tied to China, oil and global risk-taking all still
looked shaky. Sterling – down 10 percent since early December - fell
another half a percent to a seven-year low of $1.4096. <GBP=D4>
Others, however, were all off Wednesday's lows. Traders said lack of
action by the Brazilian and Canadian central banks - many had
expected policy moves by both - had calmed currency markets before
the ECB meeting.
"These central banks are well aware that they can't be too downbeat
when talking about growth and inflation expectations," said Richard
Benson, co-head of portfolio management at currency fund Millennium
in London. "The ECB is not going to ease. I suspect it will remind
the market of the moves it made in December and leave it at that."
That said, a jump in euro implied volatility - derivatives allowing
traders to cover themselves against, or bet on, sharp moves - have
jumped to around 20 percent in the last 24 hours. After the bank as
expected kept interest rates on hold, all eyes were on ECB chief
Mario Draghi's news conference at 1330 GMT.
Many speculative investors were hurt by the bank's stopping short of
more aggressive easing moves in December, leaving more doubt in many
minds.
"After the December meeting, Draghi has made himself an
unpredictable integer," said Mark Farrington, managing director of
$7.7 billion hedge-fund style currency managers Macro Currency Fund
in London.
"When he did act then he always aimed to surprise the market and
over-deliver. The December meeting was a break in the sequence of
his behaviour and that has made it impossible for people to have
that level of confidence that they had before."
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"My own approach is to wait and listen, to see how they're going to
modify the message from here."
The euro was up 0.1 percent at $1.0905 in morning trade in Europe,
down from Wednesday's highs of $1.0976 and virtually unchanged from
levels seen immediately after the ECB's last meeting in December.
Analysts assume that keeping the euro weak is a central plank of
Draghi's efforts to refloat the euro zone economy and get inflation
moving back towards its target of below or close to 2 percent.
But they are far less sure of how much more currency weakness Draghi
and colleagues would like from here: market forecasts on euro-dollar
rates are now widely split after a year when most only pointed down.
The dollar had recovered to 117.06 yen <JPY=>, having descended to
115.97 yen overnight, its lowest since January 2015. A report by
Bloomberg quoting an unidentified Tokyo official that authorities
were "closely watching the currency markets" lifted the greenback,
traders in Asia said.
(Editing by Larry King)
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