* ECB seen standing pat on rates
* Investors to take cue from Draghi's press conference
* Dlr-yen up slightly after 1 pct fall a day earlier
By Anirban Nag
LONDON, June 6 The euro rose to a four-week high
against the dollar on Thursday ahead of the end of a European
Central Bank meeting expected to keep interest rates on hold.
Investors had been building positions against the euro on
speculation that the ECB could lower its already low main
refinancing rate and take its deposit rate
to below zero, if the economy deteriorated.
But latest economic data has shown some signs of
stabilisation, giving the ECB room to hold off from lowering
rates, for now.
While that was helping the euro, gains were expected to be
capped by caution from ECB President Mario Draghi about a
sustained recovery. Draghi, who addresses a press conference at
1230 GMT after the ECB announces its decision at 1145 GMT, is
likely to keep the option of more policy action on the table.
The euro rose to $1.3131, its highest level since May
9 and up 0.3 percent on the day. Immediate resistance is seen
around $1.3140, the 76.4 percent retracement of its May 1-17
fall with stop-loss buy orders above $1.3150. The euro was also
up 0.4 percent against the yen at 130.18 yen.
"The question is how far can the euro go and to my mind, if
Draghi rules out negative interest rates, we could see the euro
higher," said Peter Kinsella, currency strategist at
"But, we think Draghi will try and talk down the euro and
hence see any bounce to $1.32 as a selling opportunity."
The euro's rise dragged the dollar index to a four-week low
The dollar recouped some of its lost ground against the yen,
having lost 1 percent a day earlier. Traders said the pair
continued to track sharp swings in Tokyo shares.
The U.S. currency was at 99.25 yen, up 0.2 percent,
but still not far from a four-week low of 98.86 yen, struck
earlier in the session.
Dollar-yen has been tracking the Nikkei stock average
over its steep decline in the past two weeks, as foreign
investors wind back the hedges they had put on for protection
from the yen's slide between November and May.
"Even if the Japanese stock market goes back up it will
likely stay volatile and that will make the yen hard to sell,
regardless of whether the market is bullish on the dollar," said
Masashi Murata, senior currency strategist at Brown Brothers
The dollar's fall on Wednesday was exacerbated after a
closely watched report showed hiring by U.S. firms was sluggish
in May. That raised the risk that Friday's non-farm payrolls
could disappoint and lessen the likelihood that the Federal
Reserve will taper its easing programme early.