* Euro hits five-week lows vs USD, plumbs 16-month low on
* WSJ report says Bundesbank willing to back ECB easing next
month if needed
* Sterling awaits BOE report and UK jobs data
By Ian Chua
SYDNEY, May 14 The euro languished at five-week
lows against the dollar early in Asia on Wednesday, having come
under renewed pressure as markets grew more convinced the
European Central Bank would ease policy next month.
The euro last traded at $1.3704, not far from the
overnight low of $1.3688. A break below the April 4 trough of
$1.3672 would take it back to levels not seen since late
It has slid more than 2 percent since Thursday when ECB
President Mario Draghi said the bank is ready to take action
next month to boost the euro zone economy if updated inflation
forecasts merit it.
The euro's latest decline was sparked by a report on the
Wall Street Journal that said the Bundesbank is willing to back
an array of stimulus measures from the ECB next month if needed
to keep inflation from staying too low.
"The euro's fading resilience since last week's ECB meeting
suggests the currency should remain vulnerable to softer data
including today's March eurozone industrial output where our
economists expect a 0.2 percent decline," analysts at BNP
Paribas wrote in a note to clients.
The euro also lost ground against the yen, slipping to
140.12 and nearing a two-month trough of 139.88
plumbed on Friday. Against sterling, it struggled near a
16-month low of 81.32 pence set overnight.
Traders said the near-term outlook for sterling hinges on
the Bank of England inflation report and UK employment data due
later in the day. Both could potentially provide fresh signals
on the timing of an expected rise in UK interest rates.
JPMorgan analysts said they are expecting the BOE report to
provide some confirmation of market expectations for gradual
tightening beginning early next year, "although this should be
tempered by a BOE very much comfortable with the absence of
Pressure on the euro helped the dollar index rise to
a five-week high of 80.180. It was last at 80.116. The greenback
also firmed on the yen, pushing up to its highest in over a week
There was little reaction in the Australian dollar to the
federal government's tough budget as most of the measures had
been leaked in the weeks leading up to the announcement late on
The Aussie last stood at $0.9361, still hovering
just below 94 U.S. cents, a level that has capped the currency
Moody's said the government's fiscal plan was supportive of
the country's stable triple-A credit rating, while S&P said the
budget was "consistent with our view of strong political
commitment to prudent budget finance."
"Despite all the concern in the lead up, most measures were
well flagged with no real negative surprises," said Alan Oster,
chief economist at National Australia Bank in Melbourne.
"Overall, the market sees the budget as a good start towards
addressing the looming structural pressures facing government
(Editing by Shri Navaratnam)