* Players take precautions ahead of possible ECB easing
* ECB not expected to cut rates, may opt for lesser measure
* Aussie spikes after data supports steady rates outlook
By Shinichi Saoshiro
TOKYO, March 6 The euro stayed on the defensive
on Thursday, having lost ground against its peers as investors
prepared for possible policy easing by the European Central Bank
later in the day.
The Australian dollar spiked to a nine-day high after upbeat
retail sales and trade data supported a steady interest rate
The euro last stood at $1.3728, having slipped as far
as $1.3707 overnight. It was also down against sterling
"The ECB is expected to ease in capacity sooner or later but
it is hard to find decisive factors supporting such a move this
time," said Bart Wakabayashi, head of forex at State Street in
Some participants are still following standard procedure
ahead of monetary policy decisions and reducing long positions
in the euro, Wakabayashi said.
The ECB is expected to refrain from cutting interest rates
at its meeting on Thursday and opt for a less drastic step of
loosening lending conditions to fight off the danger of low
A slight upward surprise in euro zone inflation in February
and initial signs of life in some economies in the region have
eased pressure on the ECB to take radical steps.
Analysts at Citigroup Global Markets said the ECB risked
disappointing the markets by providing less stimulus than
expected, supporting the euro.
"There is also a risk that even if the ECB were to do the
modest easing that many expect, any positive impact on the euro
would be very short term and, as has happened at earlier
meetings, the euro could bounce back before the ink on the press
conference transcript is dry," Steven Englander, global head of
G10 foreign exchange strategy at Citigroup Global Markets, said
in a note to clients.
Still, market participants said the euro could face negative
pressure if geopolitical tensions flare up again with high-level
diplomatic efforts to resolve the crisis in the Ukraine making
little apparent headway.
With the euro on the back foot, the U.S. dollar index
climbed to its highest for the week at 80.272. It has since
retreated to 80.148, partly due to disappointing U.S. data.
Reports on Wednesday showed U.S. private employers added
fewer workers than expected in February and growth in the
services sector slowed. All eyes are now on nonfarm payrolls due
Against the yen, the greenback stood at 102.51,
continuing to pull away from Monday's low of 101.20. Talk of
maturities in dollar/yen options could inject a bit of
volatility in the pair, traders said.
The euro edged up 0.2 percent to 140.715 yen,
moving further away from a trough of 138.79 yen touched a week
ago on jitters over the Ukrainian crisis.
The Australian dollar gained 0.4 percent to $0.9021
after brushing a one-week high of $0.9033.