FOREX-Euro shaky after ECB's cautious stance, dollar falters versus yen

Thu Aug 7, 2014 8:17pm EDT

Related Topics

* Continuing yield decline pressures dollar

* Aussie eyes China trade data for relief

* RBA quarterly monetary policy statement also in focus

By Shinichi Saoshiro

TOKYO, Aug 8 (Reuters) - The euro was on the backfoot early on Friday after European Central Bank President Mario Draghi struck a cautious note on the euro zone economy, while lower debt yields pressured the dollar against the yen.

The European Central Bank's decision on Thursday to leave interest rates unchanged on Thursday was not unexpected, but Draghi said the Ukraine crisis threatened the economy and weakened the euro.

The euro traded little changed at $1.3360 after shedding about 0.15 percent overnight. The common currency, which hit a nine-month low of $1.3333 on Wednesday, stands to lose about 0.5 percent on the week.

The dollar eased to 102.05 yen after the benchmark 10-year U.S. Treasury yield declined sharply overnight on concerns over the escalating conflict in Ukraine, and a Russian ban on Western food imports.

The greenback had risen as high as 102.46 on Thursday on news that Japan's public pension fund plans to increase asset allocations to the domestic stock market.

"Broadly speaking dollar/yen is still in a range centred around 102. But it failed to establish a foothold above 103 last week after the weaker-than-expected U.S. non-farm payrolls," said Masafumi Yamamoto, market strategist at Praevidentia Strategy in Tokyo.

"With the economic impact of the Ukrainian conflict now drawing more attention and Treasury yields declining, downward bias for the dollar is building," he said.

Traders are also watching out for the outcome of the Bank of Japan's monetary policy meeting later in the day for any cues.

While the BOJ is expected to stand pat on policy, a weaker assessment of the economy by policymakers could stoke expectations of further monetary easing and dent the yen.

The Australian dollar, which tumbled on Thursday after data showed a surprising jump in the domestic unemployment rate, is likely to look to Chinese trade data due at 0200 GMT for some relief.

A strong rise in exports from the world's second-biggest economy - Australia's major export market - should support the Aussie.

The market will also pay attention to the Reserve Bank of Australia's quarterly statement on monetary policy at 0130 GMT for the central bank's views on inflation and growth views.

The Australian dollar was almost flat at $0.9267 after sliding nearly 0.9 percent on Thursday, when it hit a two-month low of $0.9259. (Editing by Shri Navaratnam)

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