* Draghi says will monitor impact of euro strength
* ECB policy bias perceived still less loose than Fed,
* Yen likely to log seven straight weeks of fall
* Pound recovers after incoming BoE chief drops no easing
* Aussie rebounds on China data after hitting 3-month low
By Hideyuki Sano
TOKYO, Feb 8 The euro hovered near a two-week
low on Friday after the European Central Bank chief hinted at
concern about the impact of the currency's recent strength on
the economy, in remarks that analysts said went further than
they had expected.
Mario Draghi said on Thursday that the exchange rate is
important for growth and price stability and that he wants to
see "whether the appreciation is sustained and will alter our
The euro traded at $1.3410, close to its late U.S.
levels after having fallen 0.9 percent on Thursday, when it
briefly dropped as low as $1.33705, the lowest since Jan. 25.
Draghi said economic activity in the euro area should
recover gradually in 2013 but added there are more negative
risks than positive.
"I got the impression that he went into greater depth than
expected ... given that last month he just read out a G20
statement, when he was talking about currencies," said Teppei
Ino, currency analyst at the Bank of Tokyo-Mitsubishi UFJ.
The euro also slipped to a two-week low against the British
pound, which broadly strengthened after incoming Bank of England
governor Mark Carney gave no hints that he favoured immediate
easing monetary policy.
The euro fell to as low as 85.16 pence, and last
stood at 85.22. The pound also rose against the dollar to
$1.5728, off a six-month low of $1.5630 hit earlier in
The single currency also slipped against the yen from a
33-month high of 127.71 yen set on Wednesday to trade at 125.15
Still, despite the latest setback, the euro could be
supported by the perception that the ECB's policy easing bias is
much weaker than that at the U.S. Federal Reserve and the Bank
of Japan, said Makoto Noji, senior strategist at SMBC Nikko
"When U.S. and Japanese central banks are expanding their
balance sheet, the ECB is shrinking its balance sheet. And it's
not like the ECB is ready to cut rates soon because the euro's
rise is causing real risk of deflation. The euro is likely to be
firm unless we have a major surprise in Italian election," he
Polls have showed Italy's centre-left bloc is in the lead to
win the Feb. 24-25 election.
But its narrowing lead over the centre-right led by former
prime minister Silvio Berlusconi has unnerved investors on
concerns that his policies, such as tax-cut proposals, could
undo the country's efforts to win back investor confidence.
The yen edged up on profit-taking but is still likely to log
seven straight weeks of losses against the dollar, which would
be the longest spell since 1989.
The dollar dipped 0.4 percent to 93.26 yen, as
traders took profits after its failure to convincingly break
above a major resistance at 93.96, a 38.2 percent retracement of
its 2007-2011 decline. But it's still up 0.6 percent on the
The dollar hit a 33-month high of 94.075 yen earlier in the
week as investors sold the yen on expectations that Japan will
pursue aggressive monetary easing to shore up the economy.
The country's deteriorating balance of payment also weighed
on the yen. Data showed Japan posted a current account deficit
for two months in a row in December, the first time the balance
turned red for two straight months in data dating back to 1985.
The Australian dollar dropped to three-month low of $1.0256
after the Reserve Bank of Australia trimmed its growth and
inflation forecasts, but the currency bounced back after strong
Chinese exports data.
It last stood at $1.0295, up 0.15 percent from late
U.S. levels as data showed China's exports grew 25 percent in
January from a year earlier, above expectations of 17 percent
growth, adding to evidence of an economic rebound.