* ECB's Weidmann hinted earlier of negative rates, QE
* Aussie trades near 4-month high on China stimulus hopes
(Adds analyst quotes, detail)
By Shinichi Saoshiro
TOKYO, March 26 The euro steadied on Wednesday,
bouncing off lows after comments from European Central Bank
officials helped temper dovish comments made against the
background of the currency's recent bullishness.
The single currency hit a three-week low on Tuesday after
ECB governing council member and Bundesbank chief Jens Weidmann
said negative interest rates were an option to temper euro
strength and that quantitative easing was not out of the
question to combat deflation.
But the euro, which had reached a 2-1/2-year peak against
the dollar mid-March on diminished ECB easing expectations,
recovered when Weidmann later said the current euro rate does
not call for monetary policy action.
Market watchers said comments by ECB President Mario Draghi
that the central bank does not see a key symptom of deflation in
consumer spending traits also gave the euro some relief.
The euro stood little changed at $1.3818, pulling
back from the three-week trough of $1.3749 hit on Tuesday.
"The euro moved suddenly and widely after the dovish
comments regarding ECB policy, and this likely helped trigger
short-covering that prompted the bounce off lows," said
Shinichiro Kadota, chief Japan forex strategist at Barclays in
The U.S. dollar index, which measures the dollar
against six major currencies, was last up 0.1 percent at 79.985.
The dollar index has found little follow-through momentum
from last week when it rose to a three-week high above 80.35
after new Federal Reserve chair Janet Yellen suggested the
possibility of raising interest rates early next year.
Similarly, the greenback couldn't make much headway after
data on Tuesday showed U.S. consumer confidence surging to a
six-year high in March.
"Monetary policy is becoming the dominant theme in the
dollar market. Unless the indicator has direct bearings on
monetary policy, like employment or inflation, the market's
sensitivity to such data is becoming lower," said Kadota at
Against the yen, the dollar edged up 0.1 percent to 102.38
, edging further away from this month's low of 101.205
reached when safe-haven bids driven by the Ukraine crisis
supported the Japanese currency along with the Swiss franc.
The yen has been hemmed in a relatively tight range between
102.01 and 102.65 against the dollar this week, with traders
attributing its inertia to dwindling participation from Japanese
investors, many of whom are suspected of having closed their
books before the completion of the domestic fiscal year at the
end of the month.
"There are few incentives or events left that can knock the
yen out of its current range, and focus has already turned to
the U.S. nonfarm payrolls next week," said Ayako Sera, senior
market economist at Sumitomo Mitsui Trust in Tokyo.
"The nonfarm payrolls might be the only predictable factor
with enough clout to break the deadlock," Sera said.
The Australian dollar traded at $0.9162, near a
four-month high of $0.9178 hit on Tuesday.
Speculation that China will unveil stimulus measures to
re-energise its slowing economy has helped the New Zealand
dollar and Aussie, often used as a proxy for exposure to growth
cycles in China, Australia's key export market.
The market was keeping an eye on Reserve Bank of Australia
Governor Glenn Stevens, due to speak in Hong Kong at 0330 GMT.
Recent Aussie strength could trigger a fresh round of
jawboning that the currency is too high, though RBA officials
have been noticeably less aggressive in their comments recently.
(Editing by Shri Navaratnam and Eric Meijer)