NEW YORK (Reuters) - The euro held steady on Wednesday in choppy trading as investors awaited a European Central Bank meeting, which they expect will result in interest rates falling deeper into negative territory and more bond purchases to help the euro zone economy.
The Canadian dollar jumped after the Bank of Canada left policy rates unchanged and said its economic outlook was largely the same as in January as recent market volatility “appears to be abating.”
A rebound in oil and metal prices also rekindled bids for the Canadian dollar and other commodity-sensitive currencies including the Australian and New Zealand dollars.
Still, the ECB meeting on Thursday is seen as the marquee event for the currency market this week.
Greg Anderson, global head of FX strategy at BMO Capital Markets in New York, said the market was trading “nervously ahead of the ECB meeting.”
The ECB is expected to cut the deposit rate by 10 basis points to -0.40 percent, announce more asset purchases and possibly introduce tiered interest rates like the Bank of Japan in a bid to boost inflation, according to a Reuters poll published on Monday.
More ECB stimulus would put downward pressure on the euro but analysts have said ECB policymakers may not deliver the levels of easing traders expect.
The euro fell to a one-week low against the yen before turning higher. It was last up 0.6 percent at 124.76 yen EURJPY=.
The single currency was little changed at $1.1008, erasing an earlier 0.6 percent fall against the greenback EUR=.
The euro’s turnaround, together with higher oil and industrial metals prices, erased the dollar’s initial gains.
The dollar index .DXY, which measures the greenback against the euro, yen and four other currencies, dipped 0.1 percent to 97.112.
In London, benchmark Brent crude LCOc1 was up 3 percent at $40.95 a barrel and copper futures CMCU3 ended 1.1 percent higher at $4,922.50 a tonne.
With oil Canada's biggest export, the loonie hit a 3-1/2-month peak against the dollar, last trading 1.2 percent stronger at C$1.3253 CAD=D4.
Elsewhere in the dollar bloc, the Kiwi was up 0.6 percent at $0.6782 NZD=D4 ahead of a New Zealand central bank meeting on Thursday. While markets imply a small chance of a rate cut, investors suspect it is only a matter of time before the central bank delivers another cut to the 2.5 percent cash rate. RBNZWATCH
The Aussie dollar AUD=D4 was up nearly 1 percent at $0.7511 after reaching an eight-month high versus the greenback.
Additional reporting by Shinichi Saoshiro; Editing by Hugh Lawson and Meredith Mazzilli