* ECB's Draghi speech may weigh on euro
* Euro zone PMIs and German IFO a key focus
* Chinese yuan drops to 14-month low vs dollar
(Recasts, adds quotes, details)
By Anirban Nag
LONDON, April 22 The euro hovered near a
two-week low against the dollar on Tuesday and fell against the
yen, as expectations the ECB will try to halt any further
strengthening kept investors away from the single currency.
European Central Bank President Mario Draghi is scheduled to
give a keynote speech in Amsterdam on Thursday. He recently made
clear the euro's strength is a possible trigger for the central
bank to ease monetary policy.
The euro was flat at $1.3795 after having slipped to
a two-week low of $1.3785, in low volumes as traders return from
the long Easter weekend. It was down 0.1 percent at
141.40 yen and slipped against the pound to 82.10
Investors are also awaiting euro zone 'flash' PMI surveys on
Wednesday while the German IFO institute's monthly reading of
business sentiment in Europe's largest economy
is due a day later.
Last week, the monthly German ZEW poll showed investor and
analyst sentiment falling for the fourth month in a row in April
due to the crisis in Ukraine, and another set of subdued
economic data could add to pressure on the ECB to ease.
"Euro/dollar is likely to trade with a weaker bias this week
given the German IFO and Draghi's speech coming up," said Yujiro
Goto, currency analyst at Nomura.
"Any downside will be limited though, as investors will
await the inflation data due next week."
Very weak inflation in the euro zone, due partly to the
strong exchange rate, has raised pressure on the ECB to further
loosen monetary policy to stimulate growth.
In the past few weeks Draghi has brought the currency into
focus and warned that any further strengthening could lead the
euro zone's central bank to use unconventional tools such as
The euro's subdued price action supported the dollar index
, which was trading at 79.920 after touching the day's
high of 79.988, its loftiest level since April 8.
The greenback was at 102.52 yen, down about 0.1
percent, after rising as high as 102.73 yen, its highest since
April 8. The yen suffered a mild setback on Monday after data
showed Japan's export growth slowed to its weakest in a year,
adding pressure on policy makers to inject more stimulus.
WEAK CHINESE YUAN
China's weakening currency was a focus after the People's
Bank of China set a lower midpoint of the band within which its
currency is allowed to trade.
The offshore yuan hit a fresh 14-month low of 6.2335 to the
dollar on worries over a slowing Chinese economy and following
Beijing's clampdown on one-direction bets on the yuan's gains
So far there has been limited spillover into G10 currencies
from the weaker yuan, but any pick up in volatility could see
investors prefer safe-haven and liquid currencies. The Chinese
currency has lost around 2.8 percent against the dollar since
the start of the year.
Meanwhile, the New Zealand dollar rose 0.2 percent to
$0.8590 as investors gear up for the Reserve Bank of
New Zealand to hike interest rates for a second time this year.
"We expect the one-page statement will strike a more
cautious tone than previously, mainly due to the high exchange
rate and soft inflation data," said Imre Speizer, strategist at
Westpac Bank in Auckland.
(Editing by Catherine Evans)