* Euro broadly lower after ECB flags possibility of easing
* Dollar pulls back from lows versus yen but still shaky
* Ukraine, stocks, Chinese data in focus this week
(Adds quotes, details)
By Ian Chua and Shinichi Saoshiro
SYDNEY/TOKYO, April 14 The euro got off to a
shaky start on Monday after the European Central Bank fired
another warning shot at bullish investors and arrested the
single currency's week-long surge, saying it will be forced to
ease monetary policy further if the euro keeps going up.
In the clearest signal yet that he was unhappy with the
direction of the currency, ECB President Mario Draghi on
Saturday told a news conference that "a further strengthening of
the exchange rate would require further stimulus."
ECB policy member Christian Noyer hammered home the message
on Monday saying: "The stronger the euro is, the more
accommodative policy is needed".
Investors took heed in Asian dealings, sending the common
currency down broadly.
The euro dipped 0.2 percent to $1.3850 after rising
almost uninterrupted last week to gain 1.3 percent, its largest
weekly gain since September.
The common currency slid 0.4 percent to 140.62 yen
from levels above 141.00 and reached near one-month
lows against the Swiss franc at 1.2135 francs.
Further weighing on the euro, Ukraine gave pro-Russian
separatists a Monday morning deadline to disarm or face a
"full-scale anti-terrorist operation" by its armed forces,
raising the risk of a military confrontation with Moscow.
"Draghi and the situation in Ukraine are going to keep the
euro heavy," said Greg Gibbs, strategist at RBS in Singapore.
"But the reaction is pretty muted given the strength of
Draghi's comments on the weekend."
Gibbs said while the market thinks further ECB stimulus is
inevitable, other factors such as solid demand for peripheral
euro zone debt were underpinning the euro for now.
The latest setback in the common currency helped lift the
dollar index, pushing it further away from a three-week
trough plumbed last Thursday. The index was last up 0.2 percent
Against the yen, the dollar stood little changed at 101.545
yen after easing away from last week's trough of 101.30.
But the greenback still remained firmly on the back foot after
dropping 1.6 percent against the Japanese currency last week.
Market players said the dollar received a bit of reprieve on
reports that Japanese Prime Minister Shinzo Abe would meet Bank
of Japan Governor Haruhiko Kuroda during the month, which helped
stoke expectations for further monetary easing by the central
"The reports have helped the dollar but support is likely to
melt away unless the meeting actually results in concrete
steps," said Junichi Ishikawa, market analyst at IG Securities
For the near term, traders expect the safe-haven yen to stay
in favour given escalating tensions in the Ukraine and jitters
surrounding the sell-off in technology stocks.
On Friday, the Nasdaq closed below the 4,000 mark
for the first time since February as investors turned sour on
biotech and momentum stocks.
"Wall Street's performance will remain a key driver for the
dollar and yen. Near-term focus is on 101.20 yen. It appears
significant bids for the dollar are lined up there, and a break
below that level is likely to trigger significant covering of
yen shorts," Ishikawa at IG said.
A break below 101.20 yen, a low hit on March 3 when Russia
was tightening its grip on Crimea, would take the dollar to a
Commodity currencies, usually sold off in times of market
stress, appeared to be holding up quite well so far. The
Australian dollar last traded at $0.9398, having last
week peaked at a five-month high of $0.9461.
Key this week for the Aussie and risk appetite in general is
a batch of Chinese data due on Wednesday including industrial
output, retail sales and growth data.
Further signs of weakness in the world's second-biggest
economy could hit sentiment given recent commentary suggesting
Beijing was not keen on any large scale stimulus even in the
face of slower growth.
(Editing by Jacqueline Wong)