* ECB interest rate cut next week seen possible, but not a
* Japan Ministry of Finance data shows Japan capital outflow
* Australia, New Zealand markets closed for holidays
By Lisa Twaronite
TOKYO, April 25 The euro bounced back against
the dollar and yen in Asian trading on Thursday, as investors
covered some short positions taken in the wake of disappointing
The Munich-based Ifo think tank's survey of German business
sentiment showed its second straight monthly drop in April. That
heightened fears about the outlook for the euro zone's largest
economy and added to speculation that the European Central Bank
will cut rates soon.
The downbeat Ifo survey came on the heels of German
purchasing managers' index data on Tuesday, which showed a sharp
drop in business activity.
But some market participants said that despite the recent
weak data, a rate cut by the ECB to its already record-low 0.75
percent at its meeting next week is far from a given.
"Of course the ECB will consider cutting rates, but it also
could discuss how to spread the monetary easing effects to other
countries like Spain or smaller countries," said Masashi Murata,
senior currency strategist at Brown Brothers Harriman in Tokyo.
Recent comments suggest that some central bank members are
likely to consider other options besides cutting interest rates,
such as loan programmes, he said.
The ECB has room to act on interest rates if economic
conditions remain weak, ECB Vice President Vitor Constancio said
The euro added about 0.3 percent to $1.3050, moving
further away from a two and a half week low of $1.2954 tapped
Against the yen, the euro tacked on 0.1 percent to 129.71
yen, after rising as high as 129.90 yen, and well
above its overnight low of 128.78 yen.
The dollar was steady against its Japanese counterpart at
99.43 yen, still shy of the 100-yen mark after suffering
bad news of its own on Wednesday, when U.S. data showed orders
for durable goods marked their biggest drop in seven months in
The U.S. unit hit a four-year high of 99.95 yen on the EBS
trading platform on April 11, a week after the Bank of Japan
unveiled its radical monetary stimulus programme.
In recent sessions the dollar has been flirting with the
100-yen level -- above which it last traded in April 2009 -- but
options barriers have thwarted every attempt to breach it so
"My view on that 100 level is that it's just a number. The
bigger issue is what happens after it breaks, and whether it's
sustainable," said Sue Trinh, senior currency strategist at RBC
in Hong Kong.
Data from Japan's Ministry of Finance on weekly capital
flows showed that Japanese investors remained net sellers of
foreign bonds, unloading a net 862.6 billion yen in the week to
Investors have been closely watching flows data in recent
weeks for any indication that the BOJ's massive stimulus
unveiled on April 4 has pushed Japanese investors to seek higher
returns overseas, which would usher in further yen weakness.
Major Japanese life insurers have recently expressed caution
about shifting funds into foreign bonds.
Looking ahead, the BOJ will update its forecasts after its
policy meeting on Friday from which no new major monetary steps
are expected. Investors will see whether BOJ Governor Haruhiko
Kuroda's two-year time frame to hit a 2 percent inflation target
will become the bank's official forecast, even though many
analysts believe such a prediction might be too optimistic and
could put the bank's credibility on the line.
With markets in Australia and New Zealand closed for public
holidays, regional liquidity was thinner than usual, market
The Australian dollar was about 0.3 percent higher against
the greenback at $1.0308, after hitting a nearly
one-week high of $1.0317. It moved away from a 6-week low of
$1.0219 struck on Tuesday after a weak reading on the Chinese