* Euro stays above chart support at $1.30
* Upcoming euro zone economic data key to euro outlook
* U.S. leading indicators, Philly Fed index unexpectedly
By Wanfeng Zhou
NEW YORK, April 18 The euro edged higher against
the dollar on Thursday, a day after posting its biggest daily
drop in 10 months, but remained vulnerable on expectations the
European Central Bank may soon lower interest rates.
The dollar slid against the yen after a gauge of future U.S.
economic activity fell in March for the first time in seven
months while growth in factory activity in the U.S. mid-Atlantic
region unexpectedly slowed, adding to worries the recovery is
The euro lost 1.1 percent on Wednesday, its worst daily
performance since June, after ECB Governing Council member Jens
Weidmann, was quoted by the Wall Street Journal as saying the
bank could ease further if economic data warrants it.
"The keys to the euro going forward should be squarely in
the hands of euro zone data. A continued stream of lackluster
data would strengthen the case for an ECB rate cut and weigh on
the euro," said Joe Manimbo, senior market analyst at Western
Union Business Solutions in Washington.
The euro rose 0.1 percent to $1.3036, finding strong
support at the psychologically important $1.30 level.
Weidmann's comments "by themselves are not new -- the ECB
already shifted to an easing bias at the April meeting and said
it will closely monitor all incoming information," said Michael
Sneyd, currency strategist at BNY Paribas in London.
"However, the fact that the comments were made by the most
hawkish member of the Governing Council suggests the ECB is
quite close to delivering a refi rate cut."
Some analysts were skeptical about how negative this would
be for the euro. Unlike Japan and the United States the ECB is
not printing money via quantitative easing, which tends to
weaken the currency. Some also believed a rate cut could be
positive for the euro zone growth outlook.
The euro also remained vulnerable to euro zone political
risks, with presidential elections in Italy beginning on
Thursday and continued uncertainty over a bailout deal for
Cyprus, despite Germany's lower house of parliament voting in
favour of it on Thursday.
Against the yen, the euro was little changed at
127.80 yen, holding below its recent three-year high of 131.11
The dollar fell 0.1 percent to 98.03 yen, and traders
cited supporting bids around 97.60 yen.
Analysts expect further yen weakness and believed Japan will
unlikely face much criticism of its aggressive monetary easing
at a meeting of Group of 20 countries beginning on Thursday in
The dollar hit a four-year high of 99.94 yen last week,
stalling just short of option barriers at the psychologically
key 100 yen threshold.
"This is a longer-term move and therefore periods of
correction are basically buying opportunities and that's
probably what we are in at the moment," said Steve Barrow, head
of G10 currency research at Standard Bank, who said 110 yen was
a likely target for this year.
The BOJ's radical monetary policy overhaul will pump about
$1.4 trillion into the economy in less than two years, via a
hefty bond-buying scheme that is expected to drive Japanese
investors to look overseas in search of better yields.
But weekly data from the Japanese Ministry of Finance showed
Japanese investors actually selling their holdings of foreign
bonds over the last week. Still, analysts said low returns and a
weakening yen would eventually drive money out of the country.