* Euro retreats further from 2-1/2 year highs
* ECB policy to be accommodative for some time -Constancio
* BOJ holds policy steady, downgrades view of exports
* NZ dollar hits post-flotation high on trade-weighted basis
By Anirban Nag
LONDON, March 11 The euro fell against the
dollar and the yen on Tuesday after a senior European Central
Bank (ECB) policymaker told investors that they may have missed
the message on policy that rates are set to remain accommodative
for some time to come.
Vice President Vitor Constancio told MNI news agency that
the ECB made its forward guidance more precise at its March
meeting by emphasising the slack in the euro zone economy. The
ECB still had policy ammunition in the form of lower interest
rates or quantitative easing if needed, he said.
The euro fell 0.3 percent against the dollar to $1.3835
retreating further from the 2-1/2-year peak of $1.3915
hit on Friday. The euro was down 0.2 percent at 143 yen
, off a recent two-month high of 143.79 yen.
"Euro/dollar is at crucial levels, technically speaking,"
Ned Rumpletin, G10 currency strategist at Standard Chartered,
said. The single currency's inability to close above $1.3894
(its Dec. 27 high) on Friday indicated that the recent rally
maybe losing steam in the short term, he said.
"Nevertheless, we have a hawkish ECB chief, higher real
yields and a market which is losing its patience with the
consensus higher dollar trade. We have adjusted our Q1 and Q2
euro/dollar forecasts and now expect euro to finish Q1 at $1.38,
up from $1.32 previously and Q2 at $1.35, up from $1.31."
The euro raced higher last week as the ECB signalled it was
unlikely to ease policy anytime soon, despite slowing inflation,
and President Mario Draghi said the currency's strength was
having only a marginal impact on imported
The yen edged up after the Bank of Japan stood pat on
monetary policy and its chief, Haruhiko Kuroda, said there was
no need to adjust monetary policy for now.
The BoJ maintained its stance on massive monetary stimulus,
as widely expected, and stuck to its view that economic growth
and consumer price increases remain on track. It downgraded its
view of exports but upgraded its view of capital expenditure and
The dollar was slightly lower at 103.25 yen, trading
at the bottom of Tuesday's 103.19-103.43 yen range.
The yen is also a safe-haven currency, so it is being
supported by worries over Chinese growth and conflict between
Russia and Ukraine.
"Dollar/yen has been in a range between 101-104 yen for much
of this year, and the yen needs a fresh trigger for the next leg
of weakness," Peter Kinsella, currency strategist at
Commerzbank, said. "That could come from a steady deterioration
in Japan's trade and current account deficits."
Analysts also said further yen weakness could come if the
BoJ indicated it was ready to ease policy further to cushion the
economy from the adverse impact of a sales tax hike.
The BoJ's next meeting on April 30 comes after a sales tax
increase scheduled to take effect on April 1. The central bank
will also release its semi-annual economic outlook then, which
investors say could give it an opportunity to alter its outlook
and justify a policy move.
Meanwhile, ahead of a widely expected rise in New Zealand
interest rates on Thursday, the New Zealand dollar hit its
highest since flotation against a currency basket in 1985.
On a trade-weighted basis, the kiwi rose as high as
79.68, according to Reuters data. The Reserve Bank of New
Zealand is set to raise rates and lay out a path for a series of
increases over the next two years, according to a Reuters poll.