* 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 Richard Leong
NEW YORK, March 11 The euro fell against the
dollar and the yen on Tuesday after European Central Bank
policymakers indicated traders may have overlooked the message
that the bank may still act to stimlate the economy.
The common currency strengthened to a 2-1/2-year peak
against the greenback last week after the ECB refrained from
introducing unconventional measures to avert deflation and
remarks from ECB President Mario Draghi following the bank's
policy meeting that were seen as hawkish.
Further ECB stimulus is seen as negative for the euro
because it would inject more cash into the economy, eroding the
currency's purchasing power.
"The market is really interested in whether it correctly
interpreted Draghi's comments," said Thierry Albert Wizman,
global interest rates and currencies strategist at Macquarie
Limited in New York.
A couple of top ECB officials signaled that traders might
have overreacted to Draghi's remarks at last week's news
Vice President Vitor Constancio told MNI news agency that
the ECB made its forward guidance more precise at its March
meeting by emphasizing the slack in the euro zone economy. The
ECB still has policy ammunition in the form of lower interest
rates or quantitative easing if needed, he said.
His remarks came after ECB board member Sabine
Lautenschlaeger, in an interview published Monday by the Wall
Street Journal, said that the bank has not run out of options
for stimulating the economy and will act if necessary.
The euro was down 0.1 percent against the dollar at $1.3856
, retreating further from the 2-1/2-year peak of $1.3915
hit on Friday. The euro was down 0.2 percent at 143.01 yen
, off a recent two-month high of 143.79 yen.
The euro's inability on Friday to close above $1.3894, which
is a crucial technical level and its Dec. 27 high, indicated
that its rally has faded in the short term, said Ned Rumpletin,
a G10 currency strategist at Standard Chartered in London.
Still, Rumpletin upgraded his euro/dollar forecast for the
first quarter and the second quarter to $1.38 and $1.35 from his
earlier view of $1.32 and $1.31, respectively.
The yen edged up after the Bank of Japan held steady 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 little changed at 103.24 yen, trading
at the bottom of Tuesday's 103.19-103.43 yen range.
Analysts anticipate the U.S. Federal Reserve will likely
further pare its bond purchase program, known as QE3, by $10
billion a month at its March 18-19 policy meeting.
The yen, a safe-haven currency, has been supported by
worries over Chinese growth and the continuing conflict between
Russia and Ukraine.
The Russian rouble was a tad weaker at 36.4077 roubles
versus the U.S. dollar.
"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."
Meanwhile, ahead of a widely expected rise in New Zealand
interest rates on Thursday, the New Zealand dollar hit its
highest level 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.