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FOREX-Dollar, euro drift as ECB meeting comes into view

Published 07/12/2016, 11:11 am
Updated 07/12/2016, 11:20 am
© Reuters.  FOREX-Dollar, euro drift as ECB meeting comes into view
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* Dollar/yen, euro/dollar subdued before Thursday's ECB meeting

* Overnight rise in US yields offer some support for dollar

* Lower oil prices pull Canadian dollar away from 6-week highs

By Shinichi Saoshiro

TOKYO, Dec 7 (Reuters) - The euro and dollar drifted sideways early on Wednesday as a wait-and-see mood prevailed ahead of Thursday's European Central Bank policy meeting, which may set the tone in a post-Trump rally currency market.

The euro was little changed at $1.0719 EUR= after slipping 0.5 percent overnight.

The common currency had slumped on Monday to $1.0505, its lowest since March 2015, in a knee-jerk reaction after Italian Prime Minister Matteo Renzi lost a referendum on constitutional reform.

It quickly pulled back to a 3-week high of $1.0797 as a worst-case political scenario for Rome appeared to have been averted for the time being.

The dollar was steady at 113.990 yen JPY= after inching up about 0.2 percent overnight following a modest rise in U.S. bond yields. It was still some distance from the week's high of 114.775 touched on Monday.

"There are not many factors for the market to trade on ahead of Thursday's ECB meeting, which remains the week's focal point," said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

"Of biggest interest for currencies is whether the ECB will hint at policy tapering. It could spell the beginning of the end of the Trump rally if the ECB does provide such a hint."

The euro was boosted last Friday by news that the ECB, while possibly extending its bond purchases beyond next March, may consider sending a formal signal that the asset purchase program will eventually end. commodity-linked currencies like the Canadian dollar sagged in the wake of retreating oil prices.

The Canadian dollar ended a three-day winning run to end lower overnight and last traded little changed at C$1.3276 CAD=D4 per dollar.

Canada's loonie had surged to a 6-week high of C$1.3236 per dollar on Monday as oil prices surged after OPEC forged a deal last week to cut output.

The Australian dollar was up 0.1 percent at $0.7471 AUD=D4 , paring losses suffered the previous day after the Reserve Bank of Australia kept rates on hold but took a cautious view on economic growth.

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