* Euro a shade lower after dovish comments from ECB
* Markets show little conviction ahead of China PMI data
* Canadian dollar holds gains after inflation shock
By Ian Chua
SYDNEY, June 23 The euro dipped ever so slightly
early on Monday in the wake of dovish comments from the European
Central Bank but investors struggled for conviction ahead of a
report on China's manufacturing sector.
The common currency briefly slipped to $1.3587 from
around $1.3599 late in New York on Friday after ECB President
Mario Draghi said interest rates would stay low over a longer
period and that large-scale asset purchases were still part of
the central bank's toolkit.
The euro has since recovered to $1.3594. As a result, the
dollar index was flat at 80.367, steadying after last
week's 0.3 percent fall, its biggest decline in over a month.
Against the yen, the dollar was little changed at 102.10.
Traders said the market is likely to stay sluggish until the
release of a private report on China's manufacturing sector due
at 0145 GMT.. Any disappointment could hit risk
sentiment, helping drive the safe-haven yen higher.
"Asia will be focusing on the HSBC flash manufacturing PMI
print today which is expected to show an improvement to 49.7,"
said Stan Shamu, strategist at IG in Melbourne.
"China data always has the potential to be a big risk mover.
With expectations quite high there is always potential for
The Canadian dollar, which was a standout performer on
Friday, stayed near a six-month high of C$1.0752 per U.S. dollar
It had rallied hard after data showed the country's annual
inflation rate hit a 27-month high of 2.3 percent in May. The
outcome was above the central bank's target and challenged the
Bank of Canada's accommodative policy stance.
Another currency buoyed by hawkish expectations was
sterling, which rose to a 5-1/2 year high of $1.7064 on
Thursday. It was last at $1.7021.
One of the Bank of England's most dovish policymakers, David
Miles, tried to play down those expectations. In an article
published on Sunday, Miles said subdued inflation in Britain
would enable policymakers to raise interest rates gradually.
Traders said apart from the report on China's manufacturing
activity, the market will also be keeping an eye on developments
Currency markets have yet to show any reaction to the
violence in Iraq, although oil prices have risen on concerns
over supply disruption.
On Sunday, militants overran a second frontier post on the
Syrian border, extending two weeks of swift territorial gains as
the Islamic State of Iraq and the Levant (ISIL) pursues the goal
of its own power base, a "caliphate" straddling both countries
that has raised alarm across the Middle East and in the West.
(Editing by Richard Pullin)