* Euro nurses more losses after ECB spurs rate cut
* European analysts unconvinced weakness here to stay
* Dollar/yen hovers above 3-week low; down 0.5 pct for the
* Australian dollar slips back from 3-week high
(New throughout, changes dateline from TOKYO)
By Patrick Graham
LONDON, May 9 The euro fell another third of a
percent against the dollar on Friday after strong words from
European Central Bank chief Mario Draghi a day earlier that
halted its march to a 2-1/2 year high.
Draghi said after the bank's policy meeting on Thursday that
the euro's strength was "a serious concern" and that the ECB was
"comfortable" with taking more action to support growth and
raise inflation at its June meeting.
That sent the single currency sharply lower and
continued to dominate trade on Friday. By 1129 GMT the euro was
down 0.4 percent on the day at $1.3785, a full two cents below
the highs hit as Draghi began speaking on Thursday.
Still, many strategists and traders in London and Frankfurt
cast doubt on whether the ECB chief's comments were enough to
put a definitive end to the trend for a stronger euro that has
dominated major currency markets so far this year.
"It seems the market this morning is still pretty impressed
by what Draghi said yesterday and some more people have jumped
on that trade," said Lutz Karpowitz, a currency strategist with
Commerzbank in Frankfurt.
"For me it is not a game changer. As long as quantitative
easing continues in the U.S., we expect the dollar to remain
under pressure. I would expect the euro to trade higher against
the dollar next week."
Neil Mellor, a strategist with Bank of New York Mellon in
London, argued that the shopping list of factors that have
driven the euro higher were all still in place: a high current
account surplus, banks repatriating cash ahead of this year's
asset review, a return of cash to southern euro zone government
bond markets and the weakening of China's yuan and resulting
sales of dollars for euros by Beijing.
While the market believes in Draghi's threat of action next
month, many say that a small cut in interest rates and any
further steps to bolster the number of euros coursing through
the European banking sector would not be enough to weaken the
No-one believes the bank is ready to launch the sort of
full-scale money-printing used by the U.S. Federal Reserve and
the Bank of England and others.
"Draghi's comments have possibly changed the situation for a
while but I'm not sure it has changed the broader picture,"
Mellor said. "I would not be very surprised if come the end of
next week the euro was taking another pop at the $1.40 level."
DOLLAR STEADY ELSEWHERE
If the euro's strength has been this year's big surprise for
markets, then it is largely in the context of the dollar's
failure to make good on the raft of calls in January for it to
Against the yen the dollar was little changed at 101.70 yen
, still not far from a three-week low of 101.43 yen set on
Wednesday. Likewise, sterling held steady at $1.6926 within
striking distance of $1.70 - a level it has not broken since
For the week, the greenback is down 0.5 percent against the
yen, weighed down by persistently dovish comments from the
Federal Reserve and low U.S. Treasury yields.
"If you ask whether dollar/yen is going to head higher or
lower, I think downside risks are increasing," said Satoshi
Okagawa, senior global markets analyst for Sumitomo Mitsui
Banking Corporation in Singapore, adding that the greenback
could head gradually lower against the yen.
The crisis in Ukraine has also supported the safe-haven yen
currency and the market will an eye on a May 11 separatist
Pro-Russian separatists voted unanimously on Thursday in
favour of holding a referendum on independence, defying calls by
Russian President Vladimir Putin to postpone the vote to open
the way for talks with the Kiev authorities.
(Additional reporting by Masayuki Kitano in Singapore and
Shinichi Saoshiro in Tokyo; editing by Susan Thomas)