FOREX-Euro steady before ECB, Canadian dollar slides again

Thu Jan 9, 2014 8:28am EST

Related Topics

* Euro recovers after overnight battering
    * Dovish statement from Draghi might hurt single currency
    * Market optimistic on Friday's U.S. non-farm payrolls
    * Canadian dollar hits lowest since November 2009

    By Patrick Graham
    LONDON, Jan 9 (Reuters) - The euro held its ground before the European
Central Bank's monthly news conference on Thursday after falling against the
dollar and British pound overnight, while the Canadian dollar deepened a slide
to hit its lowest since late 2009.
    The ECB meeting on balance was seen as a risk to the single currency,
already forecast by many to fall against the dollar this year, given the chance
of a downbeat assessment of the European economy's prospects at a time when U.S.
policymakers are beginning to tighten the monetary screws.
    The euro zone central bank, as expected, kept interest rates on hold on
Thursday but President Mario Draghi's news conference from 1330 GMT does have
potential to move the currency, dealers and strategists said.
    "We expect a dovish conference that would be slightly negative for the
euro," said Marcus Hettinger, strategist with Credit Suisse in Zurich. "Draghi
will probably have the same message as a month ago. Inflation is still quite low
and prospects for growth cloudy."
    In an outlook that contrasts with the U.S. Federal Reserve, most analysts
expect Draghi at some stage to take more steps to stimulate growth. That should
add up to relatively lower interest rates and the euro hit one-month and
one-year lows against the dollar and pound respectively late on Wednesday.
    There were some positive signals in Europe on Thursday. German industrial
output beat forecasts, while Portugal was the latest recovering economy on the
euro zone's periphery to meet strong demand for a bond issue by syndication. 
    Some 14 percent of Ireland's issue earlier this week was seen as taken up by
non-euro zone investors who will have to buy euros to buy the bonds. 
    "There has been some good buying from the U.S., in line with what we have
seen over the last year in both Ireland and Portugal," one of the lead managers
for the Portugal syndication told Reuters. 
    Hedge funds have been betting against the Canadian dollar and
another key level looked to have cracked on Thursday, the currency weakening
past lows around 1.0845 from earlier this week to its weakest since November
2009.
    That said, the slide was far less pronounced than in the previous session
and the Canadian dollar resisted falling to the new low several times before the
fall and quickly steadied at 1.0853 afterwards. 

    FED THOUGHTS
    The dollar index was lower on the day at 80.425. It rose as far as
81.166 on Wednesday, a high not seen since late November, after the weekly ADP
report showed private employers added a bigger-than-expected 238,000 jobs in
December, the strongest increase in 13 months. 
    That lifted expectations that non-farm payrolls on Friday would be stronger
than forecast and pushed 2-year Treasury yields to a four-month high of 43 basis
points. Payrolls on Friday remains the week's main event.
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