* Euro stays below two-month high as ECB meeting looms
* Aussie rises on upbeat local jobs data and China trade
* Dollar index steadier after big fall earlier in the week
* Yellen offers no surprises, says US economy still needs
(Updates levels, adds comments)
By Ian Chua and Masayuki Kitano
SYDNEY/SINGAPORE, May 8 The euro held below a
near two-month high on Thursday ahead of an interest rate review
by the European Central Bank, while the Aussie rose on
better-than-expected data on Australian jobs and Chinese trade.
For the euro, the main focus is the ECB, which is widely
expected to keep interest rates on hold.
"Expectations are low heading into Thursday's ECB meeting,
and our economists agree that a policy innovation is unlikely
this month," analysts at BNP Paribas wrote in a note to clients.
"At the same time, action cannot be ruled out entirely, and
with expectations so low, a surprise from the central bank could
have a more powerful impact on markets than we have seen
previously," they said.
The euro edged up 0.1 percent to $1.3917, but
remained below a near two-month peak of $1.3952 reached on
Traders said the euro could quickly fall back towards
support just under $1.3800 in the event of any policy surprises.
If the ECB stands pat, the common currency could stay buoyed
at current levels, market participants said.
"I'm not sure if that will be enough of a factor for the
euro to test levels above $1.40," said Teppei Ino, an analyst
for Bank of Tokyo-Mitsubishi UFJ in Singapore, referring to how
the euro might react if the ECB keeps policy unchanged.
Still, if the ECB holds off from additional stimulus as
expected, the euro will probably stay "oddly strong", Ino said.
The euro is seen as having drawn support in recent months
from factors such as the euro zone's current account surplus as
well as signs of inflows into euro zone assets.
That has kept the euro resilient even in the face of an
expected divergence in the outlook for U.S. and European
monetary policy, with the Fed in the midst of winding down its
massive stimulus while the ECB is seen likely to keep monetary
policy loose or possibly ease further in coming months.
The Australian dollar outperformed, getting a boost after
data showed that Australian jobs growth beat expectations for a
third straight month.
The Aussie dollar rose 0.5 percent to $0.9373,
having added to its gains after data showed that Chinese exports
and imports both rose slightly in April from a year ago, against
forecasts for them to decline.
The data offered some rare good news about the slowing
economy in China, Australia's biggest export market.
"You've seen firmer export performance in Korea, Taiwan,
Philippines and Malaysia recently," said Greg Gibbs, FX
strategist for RBS in Singapore.
"So there's a bit of a theme there, consistent with some
improvement in the global economic outlook. That certainly
supports the Aussie," he said.
In addition, the U.S. dollar has been weak and market
volatility has been generally low globally, which encourages
trades aimed at benefiting from higher yields, Gibbs added.
The dollar held steady versus a basket of major currencies
at 79.208, up slightly from a six-month low of 79.06 on
The dollar suffered a big fall on Tuesday after weeks of
range trading, but managed to stabilise after Federal Reserve
Chair Janet Yellen offered no surprises in her testimony to
Congress on Wednesday.
Yellen reiterated the need to continue supporting the
economy and gave few fresh clues on the direction of interest
The dollar eased 0.1 percent to 101.84 yen, holding
above a three-week low of 101.43 yen set on Wednesday.
(Editing by Richard Borsuk)