* Yen extends broad slide, focus shifts to data
* Euro lower against the dollar ahead of ECB meeting
* Overnight euro/dollar implied vols rise
By Anirban Nag
LONDON, March 5 The safe-haven yen extended
losses against the dollar and euro on Wednesday as concern over
a Russia-Ukraine standoff eased, allowing investors to focus on
a slew of data and central bank meetings.
Markets are keeping an eye on the region after Russia
test-fired an intercontinental ballistic missile from a base not
far from the east of Ukraine to a range in Kazakhstan.
But with diplomatic efforts to resolve the crisis mounting,
traders are shifting their sights to a raft of data, including a
private-sector survey of the U.S. labour market, growth in the
services sector and an important policy meeting of the European
Central Bank scheduled for Thursday.
The euro was higher against the yen at 140.50 yen
after gaining 0.8 percent on Tuesday. The dollar was up 0.2
percent at 102.40 yen after posting its biggest one-day
gain since mid-January a day earlier. The dollar was also up
against the Swiss franc at 0.8880 francs.
"While the market remains vulnerable to the game of
brinkmanship between the West and Russia over the situation in
Ukraine, it seems that they will need a dose of good data to
hold up," said Jeremy Stretch, a currency strategist at CIBC
Demand for safety faded on Tuesday after Russian President
Vladimir Putin played down the prospect of a war in Ukraine, but
market players remained on watch as Russian stock markets
fell more than 1 percent on Wednesday.
EURO AWAITS ECB
While the euro held its ground against the yen, it shed
ground against the dollar, dropping to $1.3715 and
pulling back from Friday's two-month high of $1.38255.
Despite better-than-expected retail sales data for January
and a survey which showed euro zone private-sector business
growing at its fastest pace in over 2 1/2 months in February,
investors sold the euro, given the risk that the ECB could
loosen policy at Thursday's review.
Inflation is running well below the ECB's target of just
under 2 percent, and the central bank is under pressure pull it
out of a "danger zone" where the region's fragile recovery could
"I do not think the market has priced in the risk of ECB
action fully," CIBC's Stretch added.
Indeed, overnight euro/dollar implied volatility,
a gauge of how sharp currency swings will be, jumped to 11.50
percent from around 5 percent at the start of the week.
In the United States, the ISM non-manufacturing purchasing
managers index, the private-sector ADP employment report and the
Federal Reserve's Beige Book are all likely to offer evidence on
the extent to which weather influenced a recent soft patch in
"We would prefer euro/dollar short positions near $1.3760/70
for perhaps a break down to $1.3680 should U.S. data not be
quite as soft as expected," said Chris Turner, head of FX
strategy at ING.
The start of China's annual parliament meeting offered no
major surprises, and major currencies showed little reaction.
China announced on Wednesday it would maintain its economic
growth target for 2014 at about 7.5 percent, signalling that its
policy focus would be slanted in favour of reforms and
rebalancing the economy.