* Euro comes under some pressure as focus turns to ECB
* ECB not expected to cut rates yet but likely to sound
* Kiwi among biggest losers overnight as profit taking bites
By Ian Chua
SYDNEY, April 3 The euro nursed modest losses
early on Thursday, having come under pressure as the market
turned cautious on expectations the European Central Bank may
sound dovish following its policy review later in the day.
While most analysts do not think the ECB will ease this
week, recent price data have upped the ante for the bank to do
more soon to tackle the threat of deflation.
Indeed, the head of the International Monetary Fund on
Wednesday called on the ECB to ease policy, warning
"low-flation" in advanced economies risked undercutting an
already sluggish global recovery.
The euro traded at $1.3765, having retreated from a
one-week high of $1.3821. Against the yen, it dipped to 142.98
from a four-week high of 143.48.
A Reuters poll of over 60 foreign exchange strategists taken
this week predicted the euro would fall to $1.37 in one month,
$1.33 in six and $1.29 in a year.
"If we do get actual rate cuts, we would look for EUR/USD to
fall rather sharply towards 1.36, with a decision to introduce a
negative deposit rate likely to see a particularly large
reaction," analysts at BNP Paribas wrote in a note to clients.
"Introducing new liquidity measures would have a smaller
impact...while a simple repeat of last month's disappointingly
neutral message could squeeze weaker shorts out and see EUR/USD
test back towards 1.39."
The fall in the euro helped the dollar index edge up
to 80.229, although it remained in a slim range ahead of
Friday's U.S. jobs data.
Against the yen, the dollar rose to its highest in over two
months at 103.94 thanks to upbeat private-sector jobs and
factory orders data that lifted Treasury yields.
The euro also ceded ground against the Australian dollar
but managed to outperform the New Zealand currency
, which came under heavy profit taking across the
Traders said the trigger for Wednesday's rout in the kiwi
was a drop in international milk prices for a fourth consecutive
bi-monthly auction at New Zealand's Fonterra, the world's
largest dairy exporter.
As the dairy sector generates more than 7 percent of the
nation's gross domestic product, the result came as a blow to
kiwi bulls and helped take some of the froth off the currency.
The kiwi suffered its biggest one-day fall in over two
months, pulling back sharply from a 2-1/2 year high set on
It was last at $0.8573, down more than 1 percent
from the peak of $0.8702. The kiwi also posted its biggest fall
in over two months against the Aussie, which climbed as far as
NZ$1.0808, the highest since Feb. 26.
Ahead of the ECB policy meeting, there is a slew of economic
news out of Asia to distract investors. In Australia, retail
sales is due at 0030 GMT, followed by China's non-manufacturing
PMI at 0100 GMT.
U.S. non-farm payrolls on Friday remains the big ticket item
that many investors are focused on. Any upside surprise should
lift the greenback as it would cement the Fed's path of
unwinding its ultra-loose stimulus.
(Editing by Shri Navaratnam)