* Euro firms as ECB holds rates
* ECB offers no hints of future rate cuts
* BOJ easing expectations keep pressure on yen
NEW YORK, Jan 10 The euro rallied to a one-week
high against the dollar on Thursday as investors saw no hints of
the European Central Bank laying the groundwork for cuts to its
benchmark interest rate.
Earlier, the central bank left the key interest rate
unchanged at 0.75 percent. The euro immediately gained as some
in the market had positioned for the small chance the ECB would
Market participants had been wary ECB President Mario Draghi
would signal rate cuts in the coming months at a news
conference. When that did not happen, the euro's gains
"By the end of the Q&A session, investors realized that
(Draghi's) satisfaction with improvements in financial market
conditions means the ECB is less inclined to increase stimulus,"
said Kathy Lien, managing director at BKX Asset Management in
New York. "A rate cut was not discussed at all and that in of
itself was enough to drive the euro/dollar sharply higher."
The euro was last up 1.2 percent at $1.3215 with the session
peak at $1.3222. Some $5.49 billion in euros changed
hands using Reuters Dealing data through the global session.
Draghi said euro zone economic weakness was expected to
extend into 2013, but the region should gradually recover later
in the year and risks to its outlook were on the downside.
"Mr. Draghi's normal tone of realism was replaced with a
certain aura of optimism and giddiness," said Neal Gilbert,
market strategist at GFT Forex, in Grand Rapids, Michigan. "He
smiled more, defended a potential recovery more, and overall
appeared to feel proud of the work he had done."
The euro was also bolstered by solid demand at a sale of
mostly two-year Spanish debt, which caused Spain's benchmark
10-year bond yields to fall to a 10-month low.
"The Spanish bond auction was better than expected and that
saw the euro rise," said Alexandre Dolci, FX strategist at BBVA
Against the yen, the euro rose to an 18-month
high. It last traded up 1.5 percent at 116.50 yen.
The euro also rose to a near one-month high against the
"We look for a retest on the $1.33 high seen in mid-December
and again at the start of the year," said Marc Chandler, global
head of currency strategy at Brown Brothers Harriman in New
Elsewhere, sterling rose against the dollar after the
Bank of England left interest rates and its quantitative easing
target unchanged. It was last 0.4 percent higher at $1.6091.
The dollar neared a 2-1/2-year high against the yen on
Thursday, with the Japanese currency looking susceptible to
further losses on increasing bets of easier policy by the Bank
The dollar was up 0.3 percent on the day at 88.15 yen
, still close to the 88.40 yen hit on Friday, using
Reuters data, its highest since July 2010. The yen gave up most
of its gains earlier this week.
Some $2.44 billion in yen changed hands using Reuters
Dealing data through the global session on Thursday.
Data showing strong export growth in China also knocked the
low-yielding yen as investors sought higher-yielding and
growth-linked currencies like the Australian dollar, which rose
to a four-month high versus the U.S. dollar and a 4-1/2 year
high against the yen.
"We can definitely see the trend of yen weakness continue,"
said Peter Kinsella, currency strategist at Commerzbank in
"Data for China last night was very good and that was good
for risk in general and bad for safe-haven currencies, like the
yen, which weakened on the back of that. The BOJ increasing its
inflation target poses a further risk to the yen."
Data showed China's export growth rebounded sharply to a
seven-month high in December, a strong finish to the year after
seven straight quarters of slowdown, even as demand from Europe
and the United States remained subdued. (ID:nL5N0RM09N)
Yen moves are expected to remain volatile ahead of the BOJ's
Jan. 21-22 policy meeting.