* ECB seen holding rates, but may signal rate cuts
* ADP jobs data boosts U.S. dollar prospects
* No BoJ action seen this week
By Gertrude Chavez-Dreyfuss
NEW YORK, March 6 The euro slid against the
dollar on Wednesday, the day before a European Central Bank
monetary policy meeting, pressured by expectations the bank may
flag future interest rate cuts.
The ECB is widely expected to keep policy unchanged at its
meeting on Thursday, though President Mario Draghi may use the
news conference afterward to hint at prospective policy easing.
Projections for both growth and inflation in the euro zone are
likely to be on the low side, giving the central bank room to
cut rates in the coming months.
The dollar, meanwhile, extended gains against the euro and
yen after a report showed U.S. private-sector employers added
198,000 jobs in February, another sign of improvement in the
Economists surveyed by Reuters had forecast the ADP National
Employment Report would show a gain of 170,000 jobs. January's
private payrolls were revised up to show an increase of 215,000
from the previously reported 192,000.
But while the ADP jobs data was important ahead of the U.S.
non-farm payrolls report on Friday, investors remained focused
on the ECB in the nearer term.
Some analysts have cited speculation the ECB may cut
interest rates on Thursday to help struggling euro zone nations
headed for a slowdown.
"While I think lowering rates may be feasible, I doubt the
ECB will take this step without giving some sort of red flag to
the market at least one meeting beforehand to indicate that it
may do so," said Neal Gilbert, market strategist at GFT in Grand
"And I believe tomorrow's meeting is where that flag will be
The euro was last down 0.5 percent at $1.2993.
It was the third time in four days that the euro has traded
below the key $1.30 level. So far in 2013, the euro was down 1.6
Some US$3.6 billion in euros changed hands on the Reuters
A political stalemate in Italy following inconclusive
elections is also likely to keep the euro subdued.
The dollar has also been the most sought-after currency on
Wednesday and has been for many weeks, said Samarjit Shankar,
director of market strategy, at BNY Mellon in Boston, adding
that euro zone investors have been steady buyers of the
"For market participants spooked by the euro's renewed
travails, the greenback and Swedish krona have emerged as the
safe-havens of choice, while sterling's allure has been severely
dented," Shankar said.
The dollar index rose 0.5 percent to 82.486.
The dollar hit a one-week high against the yen to 94.11
and was last at 94.10, up 0.9 percent on the day. The
euro was up 0.4 percent at 122.24 yen.
Some US$1.9 billion in yen changed hands, using Reuters
The Bank of Japan also holds its two-day policy meeting this
week. Investors are expecting no further action from the BoJ and
are instead looking at the April 3-4 meeting for some key
measures, the first policy review under new governor Haruhiko
Kuroda is expected to be formally appointed as governor
after confirmation by parliament. He is an advocate of
aggressive monetary easing.
Traders said an increasingly popular strategy is to bet on
dollar/yen moving between 90-91 and 95 yen until April 4, using
The Bank of England also meets on Thursday and will probably
keep rates steady. But if it does something, it would be to add
further bond purchases to try to boost the sluggish British
economy, analysts said.
In late trading, sterling was down 0.7 percent vs the dollar
at $1.5032, falling 7.5 percent so far this year.
The growth-linked and higher-yielding Australian dollar
earlier got a boost from data showing Australia's economy
expanded by 0.6 percent in the December quarter, and benefited
also from improved risk appetite as the Dow Jones industrial
average hit new heights.
But by late trading in New York, the Australian dollar
traded down 0.2 percent at US$1.0243, hurt by the U.S.
currency's broad strength.