* Euro comes under some pressure as focus turns to ECB
* ECB not expected to cut rates yet but likely to sound
* Yen sets fresh 10-week low versus dollar
(Updates prices, adds comments)
By Ian Chua and Masayuki Kitano
SYDNEY/SINGAPORE, April 3 The euro inched lower
versus the dollar on Thursday, staying on the defensive 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 eased 0.1 percent to about $1.3758, having
retreated from a one-week high near $1.3820 set on Wednesday.
Against the yen, the euro held steady at 143.02, down
from Wednesday's near four-week high around 143.47 yen.
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 dollar touched a fresh 10-week high against the yen at
around 104.07 yen and last traded at 103.97 yen, up 0.1
percent on the day.
Traders said the dollar initially rose versus the yen as
some traders took aim at an option barrier at 104.00 yen and
then held firm as risk sentiment showed some resilience, with
Tokyo shares pushing higher.
The greenback's rise versus the yen also came in the wake of
upbeat private-sector jobs and factory orders data on Wednesday
that lifted U.S. Treasury yields.
STERLING, COMMODITY CURRENCIES
Some market players said sterling seemed to draw support
from comments by Bank of England Governor Mark Carney, who told
The Northern Echo that interest rates could rise ahead of the
next general election, although he added that he wants to see
more jobs created in the North-East.
Sterling last fetched $1.6638, up about 0.1 percent
on the day. It rose to as high as $1.6661 earlier on Thursday.
A recent Reuters survey showed that the BoE is expected to
start raising interest rates in the second quarter of 2015.
That roughly coincides with the timing of elections in
Britain, which goes to the polls in May 2015.
Commodity currencies retreated, with the Australian dollar
slipping 0.3 percent to $0.9219, edging away from a
four-month high of $0.9310 set on Tuesday.
Even upbeat retail sales and trade data, which pointed to
solid growth in the first quarter, failed to cheer the Aussie.
Profit-taking is probably helping drag the Australian dollar
lower for now, said Jesper Bargmann, head of trading, markets
Singapore for Nordea Bank. The Aussie dollar may perform better
over the medium-term, he added.
"As long as the RBA do not express concern, then I think the
Aussie in the medium-term will be in demand," Bargmann said.
"I see a gradual move up towards 95 (U.S. cents), maximum
97, and at that stage I think there might be some increased
rhetoric from officials," he added.
In a statement accompanying its decision earlier this week
to keep interest rates unchanged, the Reserve Bank of Australia
had noted that the currency was still high by historical
standards and its recent rise would not assist the economy, but
stopped short of outright talking it down.
(Editing by Kim Coghill)