* ECB holds rates steady, gives no hint of further easing
* Euro also boosted as Spain hits top end of target at bond
NEW YORK, March 7 The euro rallied on Thursday
as European Central Bank President Mario Draghi gave no hints of
further easing in euro zone interest rates after the ECB left
its benchmark rate unchanged.
The euro zone common currency showed no clear reaction to
the ECB decision but it rallied sharply as Draghi began to
address a press conference.
The ECB had been expected to lower its inflation and growth
forecasts, giving Draghi room to cut rates and support the
recession-hit economy in coming months.
Instead, Draghi said, "Inflation expectations for the euro
area remain firmly anchored, in line with our aim of maintaining
inflation rates below but close to 2 percent over the medium
term. Overall, this will allow our monetary policy stance to
Draghi also said people have underestimated the political
commitment to the euro at their own cost.
Draghi "has not signaled easing in the months ahead," said
Omer Esiner, chief market analyst at Commonwealth Foreign
Exchange in Washington D.C. "That's why we are seeing the euro
The euro was up 1 percent on the day at $1.3094. The
session peak of $1.3116 marked a five day high. Some US$5.2
billion in euros changed hands using Reuters Dealing..
Healthy demand at a Spanish debt auction also eased some
investor concerns about the euro zone. Spain sold 5 billion
euros of bonds, hitting the top end of its targeted amount at
reduced borrowing costs despite political uncertainty in Italy.
"The Spanish auction shows there is still demand (for its
debt) which is positive and a little bit surprising considering
what is happening in Italy," said Richard Falkenhall, currency
strategist at SEB in London.
Marc Principato, director of SMB Forex Trading And Education
in New York, said the single currency, after breaching minor
resistance at $1.3050, faced more significant resistance between
$1.3250 and $1.3300 in the coming week.
Most analysts say even if borrowing costs for highly
indebted euro zone countries like Spain and Italy do not rise,
on a more fundamental basis the struggling euro zone economy
will need a more accommodative monetary policy stance along with
a weaker currency to boost growth.
Sterling rebounded from a 2-1/2-year low against the dollar
and last traded at $1.5037, up 0.2 percent, after the
Bank of England decided not to resume its quantitative easing
Many investors had bet against the pound in recent weeks on
expectations that a grim UK economic outlook would prompt the
central bank to pump in more liquidity. The BoE's bank rate is
at a record low of 0.5 percent.
Against the yen, the dollar was up 0.7 percent at 94.80 yen
, after touching a session peak of 94.85, the highest
since May 2010. Some US$2.7 billion in yen changed hands using
Earlier on Thursday, the Bank of Japan kept monetary policy
unchanged but the yen weakened against the dollar on
expectations of aggressive easing in the future. Some
strategists have revised their forecasts to show sustained yen
UBS changed its end-2013 forecast for the dollar to 100 yen
from 85 yen.