* Markets wait to see if ECB will talk down currency
* Yen tests upside against euro, dollar
* Sterling subdued ahead of BOE meeting
By Lisa Twaronite and Ian Chua
TOKYO/SYDNEY, Feb 7 The euro fell against the
dollar and a resurgent yen on Thursday, while sterling wallowed
at multi-month lows as cautious investors awaited outcomes of
central bank policy meetings in Europe and Britain.
Both the European Central Bank and Bank of England are
widely expected to keep interest rates unchanged later on
Thursday, but any dovish hints could put both currencies under
Also overshadowing the meetings are incoming BOE Governor
Mark Carney's testimony before the UK parliament as well as an
Italian banking scandal, which is likely to be a distraction at
the ECB's media conference.
"The overall trend for the euro hasn't changed, but it has
paused," said Kimihiko Tomita, head of forex at State Street in
"The scandal stirs memories of past scandals, and there's
the possibly that it, too, could become a bigger matter, so this
is making some investors cautious," he said.
With the Bank of Japan committed to open-ended asset
purchases from 2014 and aiming for a 2 percent inflation target,
pressure on the yen is likely to continue, market participants
said. U.S. speculative accounts were still actively buying the
dollar on drips, with stop-loss orders said to be placed at
93.20 yen and just below 93 yen.
The euro moved away from a 34-month high of 127.71 yen hit
on Wednesday, shedding 0.3 percent to 126.22 yen.
Against the dollar, the euro was last down 0.1 percent at
$1.3506, back near this week's trough of $1.3458 plumbed
Tuesday and moving away from a 15-month peak of $1.3711 set on
Sterling traded nearly flat at $1.5647, not far
from a 4-1/2 month low of $1.5630 set Tuesday.
While markets appeared to be positioning for dovish comments
from the ECB, some analysts suspect the bank will not be that
bothered about the recent strength in the euro
Vassili Serebriakov, strategist at BNP Paribas, said in a
client note that the majority on the Governing Council will
probably reason that the euro's strength is a result of real
improvement in the financial markets and economic outlook, thus
not warranting immediate action.
This could temper demand for the euro, which has risen more
than 2 percent against the greenback so far this year and over
10 percent on the yen.
The overnight pullback in the single currency helped the
dollar index climb to a one-week high of 79.864 on
Wednesday, though it fell to 79.799 as the greenback took a
breather against the yen.
The dollar retreated 0.3 percent to 93.36 yen from a
33-month peak around 94.075 yen hit on Wednesday.
The Australian dollar briefly jumped a quarter of a cent to
$1.0333 after a mixed jobs report, before pulling back
to $1.0310, not far from a near three-month low of $1.0296 hit
Australian employment rose by 10,400 in January while the
jobless rate held steady at 5.4 pct, modestly beating market
expectations. However, all the jobs growth was in part-time work
with full-time jobs lower.