Euro edges up as all eyes turn to ECB
Frankfurt (Sept 8) The euro edged towards a two-weekhigh against the dollar on Thursday, with traders waiting for aEuropean Central Bank policy decision that many doubt will haveany significant impact on the euro, even if monetary policy iseased further.
Investors are focusing on whether the ECB will extend itsasset-purchase programme beyond March 2017, and whether it willtweak the programme to ease supply scarcity issues - the pool ofbonds it can currently buy, in particular German Bunds, isdwindling because of record-low yields.
Growth and inflation remain weak, despite record-lowinterest rates and 1.2 trillion euros' worth of quantitativeeasing in the past year and a half.
The euro is barely 3 percent weaker against the dollar than when the bond-purchase programme was firstannounced, in January 2015, and it is up almost 4 percent thisyear.
Nearly all analysts polled by Reuters expect rates to remainunchanged on Thursday and most predict that they have alreadybottomed out. But they expect the ECB's 80 billion-euro monthlyasset buys to be extended before the end of the year .
The euro edged up 0.2 percent to $1.1265 , close toWednesday's high of $1.12725.
"If the ECB really wants to weaken the euro, it would haveto surprise on the expansionary side and it would probably haveto deliver something new - not just an extension of QE oranother rate cut even," said Commerzbank currency strategist ThuLan Nguyen, in Frankfurt.
"Those are the measures the market already knows, and themarket knows they haven't really helped in the last couple ofyears to bring inflation back to target."
The central bank will publish its latest policy decision at1145 GMT, followed at 1230 GMT by a press conference with ECBchief Mario Draghi.
The yen edged up 0.2 percent against the dollar to101.585 yen, clinging to gains of almost 3 percent made in thelast four days, after a Bank of Japan deputy governor gave fewfresh clues on whether the central bank will expand its monetarystimulus this month .
Analysts said the comments by BOJ Deputy Governor HiroshiNakaso seemed similar in tone to remarks by BOJ GovernorHaruhiko Kuroda earlier this week, in which Kuroda acknowledgedthe costs of the BOJ's aggressive stimulus.
Nakaso said on Thursday the central bank will pursue itsmassive stimulus programme by striking the right balance betweenits powerful policy effects and potential adverse effects onfinancial intermediation.
"The main message doesn't seem all that different ... Thegeneral tone of weighing the costs and benefits were in GovernorKuroda's comments as well," said Shinichiro Kadota, senior FXand yen rates strategist for Barclays in Tokyo.
"As the market reaction suggests, I don't think it wasanything that leads to any big change to the outlook," he added.
Data showing that China's imports unexpectedly rose inAugust for the first time in nearly two years helped lendsupport to the Australian dollar, which rose half a percent tohit a three-week high of $0.7716 .
Source: ForexNews
