* Euro under broad pressure, hits two-year lows vs sterling
* Dollar index rises to one-month highs
* Aussie bounces off two-week trough, kiwi still struggling
By Ian Chua
SYDNEY, July 17 The euro wallowed at five-month
lows against the yen on Thursday and held near a two-year trough
on sterling, having weakened broadly overnight in a move that
should provide some comfort to the European Central Bank.
Traders said recent upbeat UK data had prompted investors to
switch into sterling from the euro. That in turn weighed broadly
on the common currency, which extended its losses for a second
session on Wednesday.
The euro bought 137.50 yen, having hit a
five-month low at 137.45. Against sterling, it fell as far as
78.88 pence, reaching a level not seen since
September 2012. The common currency plumbed a one-month low on
the dollar at $1.3520.
Investors warmed to the pound this week after a surge in UK
inflation bolstered expectations for an interest rate hike later
this year. But data on Wednesday showing no signs of wage
pressure slightly tempered those views.
Still, the monetary policy landscape in the UK stands in
stark contrast with the euro zone, where the risk is for the
European Central Bank (ECB) to ease further.
"We believe circumstances are fast increasing the risks that
the ECB will be forced to launch further unconventional
measures," analysts at Barclays wrote in a note to clients.
"What, when and how are less certain, but there are strong
hints that a weaker euro may be the only channel to reflate the
Weakness in the euro helped lift the dollar index to a
one-month high of 80.577. The greenback was flat against
the yen at 101.65, having come under a bit of pressure at
The dollar slightly underperformed its Canadian peer after
the Bank of Canada was neutral on the next move for interest
rates. Some in the market had wagered the central bank would go
all the way and adopt an easing bias.
The dollar eased to C$1.0744, from a three-week
high of C$1.0795.
Also showing a bit of resilience, the Australian dollar
bounced back to $0.9365 from a two-week trough of
$0.9329 thanks to buoyant risk appetite in Europe and the United
Its New Zealand counterpart, however, saw no such relief
after tame local inflation data on Wednesday raised questions
about whether the Reserve Bank of New Zealand will continue to
tighten much more this year.
The kiwi last traded at $0.8715, holding not far
from a three-week low at $0.8690.
Traders said a dearth of any meaningful data out of Asia on
Thursday will probably see the major currencies consolidate at
(Editing by Richard Pullin)