* Euro takes hit from objections to bond-buying
* Constitutional Court also leaves door open to acceptance
* Aussie edges down after RBA raises growth, inflation
LONDON, Feb 7 The euro dipped against the dollar
on Friday after Germany's Constitutional Court criticised the
European Central Bank's bond-buying programme.
Traders said the court's objections to the scheme, which has
underpinned the euro over the past two years, had jarred the
But by referring the issue to the European Court, the court
also removed prospects that Germany might try to curb the
programme, which helped limit the single currency's decline.
"The euro fell, but only slightly. That's obviously
justified if you think the European Court of Justice is going to
be more ECB-friendly," said Ulrich Leuchtmann, head of currency
research at Commerzbank in Frankfurt.
The German judges said they saw substantial reasons to
suggest the Outright Monetary Transactions (OMT) programme
exceeded the ECB's mandate, but also considered it possible that
it could conform with the law if interpreted restrictively.
The ECB's commitment to buy bonds has never been used but is
generally credited with halting market attacks on Italy and
Spain that had raised concerns over the whole future of the euro
The decision also comes at a time of debate within the ECB
over its options for doing more to prop up the euro zone
economy, including the sort of outright cash injections to which
Germany has long objected.
The absence of an immediate move by the central bank on
Thursday to add liquidity to the banking system had prompted a
rise for the euro against the dollar.
After the court statement, the euro fell as low as at
$1.3552 before recovering to $1.3572, still well off highs above
$1.36 reached after the ECB's policy statement on Thursday.
QE MORE LIKELY?
"The ECB has to quickly assess what repercussions the ruling
will have for the range of tools available to calm markets,"
said Christian Schulz, senior economist at Berenberg.
"Ironically, depending on the exact decision, the court may have
made a much more wide-ranging quantitative easing programme at
the ECB more likely."
Expectations that the ECB will take more dramatic action to
spur growth, compared to the reining in of bond-buying by the
U.S. Federal Reserve, are at the heart of most banks' forecasts
for a weaker euro this year.
A U.S. jobs report on Friday is expected to show recovery in
the world's biggest economy is firmly on track.
"The manufacturing ISM earlier this week shook confidence
somewhat, adding to the weak payrolls number from a month ago,"
said Josh O'Byrne, currency strategist with Citibank in London.
"We think that if the number today comes in close to consensus
it could be enough to reassure the market."
Bart Wakabayashi, head of forex at State Street Global
Markets in Tokyo, said the big picture of an end to the Fed's
bond-buying later this year was still intact, no matter what the
jobs reports shows.
"I think in general, people are in agreement that it's not a
tapering story as opposed to just a reevaluation of their
positions," Wakabayashi said.
Even if labour conditions improve, Boston Federal Reserve
President Eric Rosengren said late Thursday that the central
bank should be "quite patient" in removing stimulus because
broader measures of the U.S. labour market remain weak.
Rosengren, considered a dovish Fed official, said the labour
market conditions remain far from those which would warrant
higher interest rates.