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* Speculation of more ECB action keeps pressure on euro
* Euro falls to lowest in nearly two years on Swiss franc
* GBP steady despite debate win by pro-independence Scottish
By Anirban Nag
LONDON, Aug 26 The dollar took a breather on
Tuesday after recent gains, but that offered little solace to a
struggling euro that was pinned down near 19-month lows against
the Swiss franc on expectations of a soft inflation reading and
more monetary easing.
The euro hit a one-year trough against the dollar earlier in
Asian trade as prospects of asset purchases, or quantitative
easing, gathered pace.
Data showing German business sentiment sagging for the
fourth month running, and the resignation of the French
government following a row over fiscal policy, added to the
bearish mix for the euro.
The single currency was trading at 1.20775, having
fallen to 1.2072 Swiss francs on Monday, its lowest since early
January 2013 on trading platform EBS, with the market close to
testing the Swiss National Bank's three-year old pledge to cap
its currency at 1.20 per euro.
"I haven't heard anything about the SNB changing its
commitment to the 1.20 floor and I don't expect it to," said
Marshall Gittler, head of currency strategy at IronFX Global.
"That means the risk/reward ratio for long euro/Swiss franc
positions is about as good as it gets right now. The rate can go
somewhat lower and of course the SNB is not required to notify
investors before changing its strategy, but past performance ...
does suggest they will keep the rate above 1.20."
Against the dollar, the euro was at $1.3202, having dropped
to $1.3178 in Asian trade.
Investors await euro zone inflation data on Friday. Analysts
polled by Reuters expect annual inflation to have slowed to 0.3
percent in August from 0.4 percent in July. That is well below
the ECB's danger zone of 1.0 percent and its target of just
under 2.0 percent.
Late on Friday, in stronger language than he has used in the
past, ECB President Mario Draghi said the ECB was prepared to
respond with all its "available" tools should inflation drop
Those comments have triggered speculation that the ECB may
be prepared to ease policy further, driving bond yields to lows.
Kyosuke Suzuki, director of forex at Societe Generale in
Tokyo, said the euro was contending with a bullish dollar while
facing its own bearish factors.
In contrast to ECB's Draghi, Federal Reserve Chair Janet
Yellen on Friday gave a nod to the concerns of some Fed
officials about the sustained level of monetary policy stimulus,
even as she stressed the need to move cautiously on raising
"Euro/dollar is vulnerable to testing new lows. A downtrend
is easily formed given the opposite directions Fed and ECB
monetary policies are seemingly headed... political trouble in
France, a core eurozone country, is also a bearish factor,"
Suzuki at Societe Generale added.
The dollar index slipped as investors booked profits
after two straight days of gains made after Yellen's comments at
Jackson Hole. It still remained close to its September 2013 peak
of 82.671. A break there will take it back to highs unseen since
July last year.
Against the yen, the dollar dipped 0.2 percent to 103.85
, having peaked at a seven-month high of 104.49 overnight.
Sterling bounced off a five-month low of $1.6501
struck on Monday to trade at $1.6582, slightly higher on the
day. It was steady against the euro at 79.62 pence,
despite pro-Scotland independence leader winning the referendum
debate on Monday.
(Additional reporting by Shinichi Saoshiro; Editing by Andrew