* Yen stays firm, Ukraine separatist referendum on Sunday
* Australian dollar hovers below 3-week peak
By Shinichi Saoshiro
TOKYO, May 9 The euro was binding its wounds in
early trade on Friday after dovish comments from European
Central Bank President Mario Draghi sent the currency tumbling
from a 2-1/2 year high on Thursday.
The euro traded little changed at $1.3843 on Friday
morning, having pulled back from $1.3992 hit on Thursday, the
highest since November 2011.
Draghi said the euro's strength was "a serious concern" and
that the ECB bank might act to stem falling inflation at its
June meeting, signalling possible easing.
Before being beaten down by Draghi's comments, the single
currency surged to the 2-1/2 year peak after the ECB on Thursday
kept monetary policy unchanged as expected.
While it has not drawn a line in the sand, traders say the
ECB, which has focused on the euro's strength in the past few
weeks, gets uneasy when the euro rises towards $1.40. A Reuters
poll on Wednesday showed most economists expect ECB action if
the euro hits $1.42.
"Focus going forward is what the ECB actually does in June,
with a rate cut and a negative deposit rate being the expected
course of action," said Shinichiro Kadota, chief Japan FX
strategist at Barclays in Tokyo.
"But rates are already low at 0.25 percent that even if the
ECB does lower it the impact will be limited, and this will not
be effective in curbing euro strength," Kadota said, adding that
expectations will quickly build towards next possible steps like
provision of liquidity and ultimately quantitative easing.
The dollar remained on the defensive against the yen,
weighed by persistently dovish comments from the Federal Reserve
and low U.S. Treasury yields.
Simmering tensions in the Ukraine have also supported the
safe-haven yen currency and the market kept an eye on a May 11
Pro-Russian separatists voted unanimously on Thursday in
favour of holding a referendum on independence, defying calls by
Russian President Vladimir Putin to postpone the vote to open
the way for talks with the Kiev authorities.
The dollar traded little changed at 101.615 yen,
having lost about 0.55 percent on the week against the Japanese
The Australian dollar stood at $0.9369, hovering
near a three-week high of $0.9395 hit on Thursday on upbeat
Australian and Chinese economic data.
(Editing by Eric Meijer)